PBF Energy to buy Chalmette refinery

OREANDA-NEWS. June 22, 2015. PBF Energy will buy ExxonMobil and PdV's joint venture 189,000 b/d refinery in Chalmette, Louisiana, a deal that gives the US independent refiner greater access to lucrative export markets.

The \\$322mn plus working capital deal includes the refinery and associated pipeline and terminal assets. PBF Energy will have access to LOOP and 80pc ownership of the Collins Pipeline Company and T&M Terminal company, which offer access to the massive Colonial produces pipeline system in Collins, Mississippi.

"The PBF management team that the board has put in place has a proven track record of purchasing and integrating accretive acquisitions and chose the right opportunity in Chalmette to build on that track record at an attractive cost per complexity barrel," executive chairman Tom O'Malley said.

O'Malley had long lamented the size and range of PBF Energy's refining capacity. The refiner commands the US Atlantic coast's only coking capacity and one of the largest on-site rail facilities in the region, increasing the crude flexibility of its system. But that flexibility depends on sufficient discounts between western Canada and the US midcontinent to the US Atlantic coast to cover rail shipping prices, a costly delivery method. Rail arbitrage for Bakken, a favored domestic crude for PBF, was closed for a third of the first quarter this year.

PBF looked for refining assets in the midcontinent, in the challenging California refining sector and at Citgo facilities on the US Gulf coast as the company tried to break out of the Atlantic.

"If it's in the United States, we want to look at it," O'Malley told reporters in November.

But refiners never recover from overpaying for a facility, O'Malley added. The opportunity appeared to fade with PdV's decision late last year to not sell its US refining subsidiary, Citgo. PBF cooled bullish talk on operating in California, where regulators have made operating steadily tougher for refiners, around the same time.

Then O'Malley hinted in February of majors interested in unloading downstream assets, a steady though waning source of opportunity for US independents since the 1990s.

"I think that continues," O'Malley said during a conference call discussing earnings.

ExxonMobil needed the approval of its 50:50 joint venture partner, Venezuelan national oil firm PdV.

PdV has had both a desperate need for cash and reluctance to sell. Attempts to divest assets are likely to draw legal action from companies seeking compensation from the Venezuelan oil firm. International arbitration has awarded ExxonMobil in separate rulings since 2011 \\$2.5bn from PdV connected to Venezuela's nationalization of oil assets. The national oil firm dangled and then withdrew a potential sale of its 747,000 b/d US refining subsidiary, Citgo, late last year. Sale talks drew early litigation from companies including ConocoPhillips, which has also sought compensation for nationalized assets.

Chalmette, which is nearly a century old, includes coking and asphalt production familiar to PBF and none of the finer chemicals integration preferred by ExxonMobil.

The refinery was modified to handle very heavy Venezuelan crudes, but the country's share of the 190,000 b/d crude slate has fallen steadily over the past five years, according to the Energy Information Administration. Venezuelan imports to the refinery have fallen from more than 80,000 b/d five years ago to less than 60,000 b/d in 2014.