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UK refinery deals finalised

Hydrocarbon Engineering,

The face of the UK’s downstream industry continues to shift as two deals for major refineries are completed, with a third mooted to be in the pipeline.

The acquisition of Chevron’s refinery at Pembroke by a subsidiary of the independent, Taxas based company Valero Energy Corporation was completed on August 1st.

Valero acquired the Pembroke refinery from Chevron, as well as the marketing and logistics assets, for US$ 730 million. As part of the deal, Valero has also purchased ownership interests in four major pipelines and 11 fuel terminals, acquired a 14 000 bpd aviation fuels busines and a network of more than 1000 Texaco branded service stations in the UK and Ireland.

The Pembroke plant, which had been on the market for approximately one year, is one of Europe’s largest and most complex refineries, with a total throughput capacity of 270 000 bpd. Valero now has 15 refineries in total and 2.9 million barrels of throughput capacity overall.

Meanwhile, Essar Energy completed the US$ 350 million acquisition of Royal Dutch Shell’s Stanlow refinery and other related assets on the same day.

The refinery, located near Ellesmere Port, is the second largest of its kind in the UK with a nameplate capacity of 296 000 bpd. It supplies one sixth of the UK's petrol.

The purchase, which was first announced in March, is to be paid in two installments. The first payment of US$ 175 million was paid on completion, while a second equal installment (plus interest) is payable in a year’s time.

Essar also made a payment of US$ 916 million to Shell for the stock of crude oil, refined products and other inventory items on the Stanlow site.

The confirmation of these sales follows news from Total in July, which sated that the French energy giant was no longer in exclusive talks to sell the 223 000 bpd Lindsey refinery, located in North Lincolnshire, UK.

The talks had previously been exclusive after reports in May suggested that Total was closing in on a deal to sell the asset.

The long-delayed sale is part of Total's plan to cut European capacity in refining by 500 000 bpd between 2007 and 2011, due to increasingly tight margins.

Further evidence that Total remains focused on this objective came on August 2nd, as the company announced the US$ 5.26 billion sale of its 48.83% interest in Spanish refiner Cepsa to Abu Dhabi's International Petroleum Investment Company (IPIC), in line with an agreement made in February.

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