Carlyle, Sunoco reach pact to keep Philadelphia refinery in operation


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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