By BEN LEFEBVRE, RYAN DEZEMBER and TOM FOWLER
Valero Energy is putting its two California refineries on the block, attempting to exit the state ahead of a ratcheting up of air-pollution regulations, people familiar with the matter said.
San Antonio-based Valero has enlisted Citigroup to help find a buyer for the facilities, these people said, adding that the process is in the early stages.
Valero, one of the largest refiners in the US, operates a 78,000-bpd refinery in Wilmington outside Los Angeles and a 132,000-bpd refinery in Benicia, in the San Francisco Bay area. Together the plants represent about 10% of the company's US refining capacity.
A Valero spokesman declined to comment. A Citi spokesman also declined to comment.
California in 2006 passed legislation that calls for air emissions to be cut to 1990 levels by the end of this decade, goals that Valero and other refiners have said will cost them hundreds of millions of dollars to meet. Even if the refiners reach those goals, the state is also pushing measures designed to cut demand for the refiners' product - namely, petroleum-based fuels.
Valero and rival Tesoro waged an unsuccessful fight to overturn the legislation in a November 2010 ballot initiative.
"We think state policy...other fiscal policies, regulations, continue to adversely affect the economy" in California, Valero CEO Bill Klesse said late last year at an investor meeting. "We're looking at our options."
Valero has not yet put a price tag on the refineries, one of the people said.
If it finds buyers for the facilities, Valero would become the second large refiner to leave California. BP in August agreed to sell its 266,000-bpd refinery in Carson along with 800 gas stations and other associated assets to Tesoro for about $2.5 billion. More than half of that price paid for oil inventories at the southern California plant.
Stagnating fuel demand in the US and the changing geography of North American oil production due to a boom in shale drilling has touched off a flurry of refinery deals in the last 18 months. ConocoPhillips and Marathon Oil spun off their refining businesses into separate publicly traded companies in the past 18 months, while BP and Sunoco have sold off individual refineries.
Meanwhile, Valero is working with Credit Suisse bankers to review its options for spinning off its nearly 1,000 gas stations, which it acquired in 2001 in its takeover of Ultramar Diamond Shamrock. The company announced its decision to shed the retail operations in July.
Dow Jones Newswires