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China Launches World’s First Smart Oil Tanker

China Launches World’s First Smart Oil Tanker

China unveiled the world’s first…

Shell Sells California Refinery for $1 Billion

Martinez Refinery

Shell has struck a deal with refiner PBF Energy to sell it its refinery in Martinez, California, for up to US$1 billion, depending on the closing date, the buyer said in a press release, adding that the acquisition will boost its total throughput capacity to more than 1 million bpd.

The Martinez refinery has a capacity of 157,000 bpd. Shell has been trying to sell it for several years, Reuters notes in a report on the news. The supermajor will now fund the turnaround costs for the facility for the first quarter of 2020, estimated at US$70 million, as well as another US$40 million in downtime compensation if the deal does not get finalized by the end of the first quarter of 2020.

Shell first tried to sell the Martinez refinery in 2015, at the height of the latest oil price crisis, so it was no wonder it failed to find any buyers quickly. Now M&A conditions have improved significantly as evidenced by the pickup of mergers and acquisitions in the industry, with the highlight of course being Occidental’s acquisition of Anadarko.

For PBF Energy, the deal fits with plans for its California refining expansion. The company already has one refinery in the state, in Torrance, which has a capacity of 160,000 bpd.

“They wanted the two refinery systems, especially considering that when Torrance goes down they just have that one refinery and they don’t make anything back,” an analyst with Tudor, Pickering, Holt & Co. told Reuters.

This seems to be particularly important ahead of the entry into effect of new International Maritime Organization emissions rules. The acquisition, PBF said, will strengthen its position among producers of new-rule compliant fuels. This is an important step for the refiner as the industry is struggling to make refineries compliant with the new, lower-sulfur fuel requirements that will enter into effect next January.

By Irina Slav for Oilprice.com

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