Pivotal Point Reached in Motiva Enterprises Dissolution

HOUSTON — The division of Motiva Enterprises LLC's assets, liabilities and businesses is on track to close in the second quarter.

Royal Dutch Shell plc announced binding definitive agreements between SOPC Holdings East LLC, a U.S. downstream subsidiary of Shell, and Saudi Refining Inc. (SRI), a wholly owned subsidiary of Saudi Arabian Oil Co. (Saudi Aramco) on the separation of the 50/50 refining and marketing joint venture. 

The move comes almost a year to the day that the two oil companies revealed they were dissolving the joint venture, which dates back to 1998. It has operated as a 50/50 refining and marketing joint venture since 2002, as CSNews Online previously reported.

A balancing payment of $2.2 billion has been agreed between the parties, subject to adjustments including for working capital.  This value will be satisfied by a combination of SRI assuming more than its 50-percent share of Motiva's net debt on completion and a cash payment for the balance.  

As of Dec. 31, Motiva's total net debt was $3.2 billion, of which Shell will assume $100 million, resulting in a deduction to the cash portion of the balancing payment of $1.5 billion. As a result of the transaction no material effect is expected on gearing reported on the Shell balance sheet, according to Shell.

"This transaction is well aligned with Aramco's global downstream strategy. Motiva is a strong competitor among U.S. refiners, and we value this important link with the dynamic U.S. energy sector," said Abdulaziz Al-Judaimi, senior vice president of downstream, Saudi Aramco. "Our intent is to continue providing Motiva with strong financial support as it transitions into a stand-alone downstream affiliate. We have a long history with the Motiva team, and we're proud of the impressive strides they have made in recent years toward building on the company's core strengths."  

Under the terms of the final negotiated transaction:

• SRI will assume full ownership of the Motiva Enterprises LLC name and legal entity, including the refinery at Port Arthur, Texas and 24 distribution terminals. 
• Motiva will have the right to exclusively sell Shell-branded gasoline and diesel in Georgia, North Carolina, South Carolina, Virginia, Maryland and Washington, D.C., as well as the eastern half of Texas and the majority of Florida.
• Shell will assume sole ownership of the Norco, La., refinery (where Shell operates a chemicals plant), the Convent, La., refinery, 11 distribution terminals, and Shell-branded markets in Alabama, Mississippi, Tennessee, Louisiana, a portion of the Florida panhandle, and the North-eastern region of the U.S. These assets will be fully integrated with Shell's downstream business in North America.
• "A simplified, integrated business structure will emerge from this deal for us in the United States and that's consistent with the stated goal of making Shell a world-class investment opportunity," explained John Abbott, Shell downstream director. "We have today created a set of assets that plays to our strengths. This portfolio upgrade will increase optionality and strengthen Shell's downstream business."

The agreement is subject to regulatory approval. 

"We are nearing completion of our preparations to support stand-alone operations upon transaction close. As always, we remain focused on safe and profitable operations and serving our customers exceptionally well," said Dan Romasko, Motiva president and CEO.

Headquartered in Houston, Motiva Enterprises is a refiner, distributor and marketer of fuels in the Eastern, Southern, and Gulf Coast regions of the United States. The company's marketing operations support a network of approximately 8,400 Shell-branded gasoline stations in the eastern and southern U.S.