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Carlyle, Sunoco reach pact to keep Philadelphia refinery in operation

07.02.2012  | 

The refinery under Carlyle is expected to become a major new user of the domestic crude that has backed up at an Oklahoma trading hub unable to reach coastal refineries. The Philadelphia refinery could begin processing US crude by the beginning of next year, increasing its demand over time.



Private-equity firm The Carlyle Group has agreed to take over operations of Sunoco’s Philadelphia refinery, staving off the scheduled closure of the East Coast's largest producer of gasoline, diesel, heating oil and other fuels.

The deal, announced on Monday, is expected to ease concerns that a rash of refinery closings along the Atlantic Ocean could result in fuel shortages and rising prices for products like diesel and gasoline this summer on the East coast, as the US Energy Information Administration warned earlier this year.

The refinery under Carlyle is expected to become a major new user of the domestic crude that has backed up at an Oklahoma trading hub unable to reach coastal refineries.

The Philadelphia refinery could begin processing US crude by the beginning of next year, increasing its demand over time, said people familiar with the matter.

That would help US oil producers and could help reduce the price difference between global and US oil, which stands at nearly $13.

Under terms of the deal, which was announced Monday morning, Carlyle will take over operations of the facility and gain a controlling stake in the joint venture that will own it, the people said.

The facility can process up to 335,000 bpd of crude.

Carlyle won't pay Sunoco, which is exiting the refining business ahead of its planned merger with pipeline operator Energy Transfer Partners, they said.

Instead, Carlyle will pay to keep the facility running and spending "well into" nine figures on updating the facility and connecting it to rail lines that will give it access to North Dakota's prolific Bakken Shale formation, they said.

Sunoco will retain about a one-third interest in the facility, essentially foregoing upfront payment in exchange for future payoffs should Carlyle succeed in returning the refinery to profitability, they said.

Philadelphia-based Sunoco is repositioning itself as an oil distribution company and retailer ahead of its merger.

Carlyle has seen big returns before in refining. It and Riverstone Holdings quintupled their money buying European refiner Petroplus Holdings and reselling it about two years later.

All current workers, about 850, are expected to retain their jobs at the facility, which may add as many as 200 new positions as the refinery is updated and connected to rail lines, according to people familiar with Carlyle's plans.

The Wall Street Journal
(via Dow Jones Newswires)

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As a refinery worker and USW member from the mid-continent region, I'm thrilled that the Philadelphia Refinery will continue to operate and that 850 USW brothers and sisters will get to keep their jobs. However, as a rock solid conservative who rarely votes the way the USW would like me to, I must point out a glaring hypocrisy that I see here. During the Bush years the Carlyle Group was, according to the Left (and the USW) the personification of evil. A super secret group of uber-rich American and British investors with ties to various shadowy Middle Eastern interests of which the Bush family was heavily involved. Now, at least to the USW, they are the white knight who rode in at the last minute to save the fair damsel in distress. I suppose if, in a few years, Carlyle sells off Philadelphia Energy Solutions and makes a tidy little profit like they did with Petroplus, then USW will once again accuse them of being greedy, rich, white republicans out to fleece everybody but for now they are heros. Wouldn't it be juicy if Mitt Romney was found to be heavily invested in the Carlyle Group?

John Q Refinery Worker

Mr. Schlusser - I'm not the sharpest pencil in the drawer but it seems to me that keeping 850 refinery workers employed is a darned good thing. It beats the heck out of the unemployment line. These guys (and gals) are union workers (Steelworkers) and they probably make $20-35 per hour with a nice benefit package. The alternative for these people is NO JOB not to mention the loss of thousands of indirect jobs and the loss of tax revenue at all levels of government.

What am I missing here?

bill Schlusser

These machinations augur badlly for the East Coast econnomy.
Petroplus paid much too much for the Carlile assets in Europe and is now paying a heavy price for those mistakes.
These are just financial machinations which do not add one cent to the US economy. On the contrary more money is flowing into the bank accounts of the supper rich.
If citizens are not prepared to pay the difference of $ 13 between overseas and domestic refining costs why keep a facility alive?
The citizens will pay Conoco in the end not Carlyle.

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