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Saudi Aramco to Pay Shell $2.2 Billion in Refinery Breakup

March 7, 2017
Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the U.S. at Port Arthur in Texas.

Saudi Arabian Oil Co. will pay Royal Dutch Shell Plc (IW 1000/2) $2.2 billion including debt to finalize the breakup of a 19-year refining partnership known as Motiva Enterprises LLC.

Saudi Aramco’s Saudi Refining unit will take full ownership of the Motiva Enterprises name and legal entity, including the largest refinery in the U.S. at Port Arthur in Texas, and 24 distribution terminals, according to a joint statement dated March 6. Shell will take sole ownership of the Norco and Convent refineries in Louisiana and 11 distribution terminals, according to the statement.

Saudi Aramco will make a $2.2 billion balancing payment, subject to adjustments including working capital, Shell said in a separate statement. The payment is split between debt and cash. Saudi Aramco will assume nearly all of Motiva’s $3.2 billion of net debt, including $1.5 billion of Shell’s share. A cash payment will cover the balance, Shell said.

“Motiva is a strong competitor among U.S. refiners, and we value this important link with the dynamic U.S. energy sector,” Abdulaziz Al-Judaimi, senior vice president of downstream at Saudi Aramco, said in the joint statement. “Our intent is to continue providing Motiva with strong financial support as it transitions into a stand-alone downstream affiliate.”

The transaction is subject to regulatory approval and expected to close in the second quarter of 2017, the companies said. Shell and Saudi Aramco, as the oil explorer is known, agreed last year to end the Motiva venture, which oversaw the three oil refineries, as well as fuel terminals and fuel-branding rights in multiple U.S. states.

Motiva's Exclusive Rights

Under the agreement, Motiva will have the exclusive right to sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, D.C., as well as the eastern half of Texas and most of Florida. Shell’s markets will be Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle, and the Northeastern region of the U.S.

Motiva, formed in 1998, was a major player in U.S. refining with capacity to process more than 1.1 million barrels of crude a day. It was plagued by cost overruns and construction delays that eroded profits, Fadel Gheit, an analyst at Oppenheimer & Co., said in March 2016. The 600,000 barrel-a-day Port Arthur refinery suffered leaks and fires that delayed a $10 billion expansion to double the size of the plant.

A former partner in Motiva, Chevron Corp. exited the partnership in 2002 as part of a settlement with regulators that allowed it to acquire Texaco Inc. Chevron’s divestment left Shell and the Saudis as 50-50 partners in the venture.

By Javier Blas, Joe Carroll and Margot Habiby

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