HOUSTON (Dow Jones)
Valero Energy Corp. (VLO) has received an offer of $350 million from PetroChina (PTR) for the idled refinery in Aruba it has been trying to sell for years, a person familiar with the situation said Wednesday.
An acquisition would give state-owned PetroChina a refining foothold near the U.S. Gulf Coast refining hub while allowing Valero, the largest independent U.S. refiner, to get rid of an unprofitable asset.
The U.S. refining industry is in the throes of major shifts in fuel demand and energy production that have wiped out the profitability of former refining hubs such as the U.S. East Coast and the Caribbean. Poor refining margins forced Valero to suspend operations at the 235,000-barrel-a-day Aruba refinery in March and Hovensa LLC to shut down its St. Croix refinery in the Virgin Islands earlier this year.
Valero used the Aruba refinery to only partially refine crude oil, sending the half-finished product to its Gulf Coast operations to finish the process. If PetroChina buys the refinery to produce fuels, it may mean the company plans to expand its footprint in the region, said Sam Margolin, an analyst at Dahlman Rose & Co.
"It might signal that Petrochina would be interested in other U.S. assets," Margolin said.
PetroChina processed more than 900 million barrels a day in 2010, according to the company' website.
PetroChina has shown interest in the Aruba refinery for years, a source in the investment banking industry said. The Aruba plant has a relatively large coker unit able to process the heavy oil PetroChina would receive from Venezuela into asphalt or coke for industrial furnaces. At $350 million -- nearly $600 million lower than what Valero listed as its book price -- the facility could also be used as an oil and fuel storage terminal.
Valero in a filing with the U.S. Securities and Exchange commission said it had received a $350 million offer for the refinery but only described it as coming from a party with "experience in the refining and marketing industry.
"Due diligence process is currently ongoing and no final agreement has been reached to sell the refinery," Valero said in the filing.
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