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    Texaco, Shell Talks Stall

    Oil companies remain about $2 billion apart on splitting Equilon and Motiva.

    Negotiations between THE Royal Dutch/Shell Group and Texaco Inc. to unwind two U.S. refining and marketing ventures have stalled, with the two sides about $2 billion apart on the purchase price, The Wall Street Journal reported.

    Texaco needs to end the Houston-based venture companies, Equilon Enterprises LLC and Motiva Enterprises LLC, to avoid antitrust concerns as it moves toward being acquired by Chevron Corp. for more than $35 billion. With the ventures, Texaco and Chevron would control 33 percent of West Coast refining capacity and 40 percent of the retail stations.

    Talks between Shell and Texaco have been contentious since Chevron and Texaco asked the Federal Trade Commission (FTC) to allow them to put the two venture into a trust so they can complete their deal. Creating a trust would put Shell in a weakened bargaining position, the report said.

    If the FTC were to turn down the trust idea, Shell would have a much stronger hand. The unit of Royal Dutch/Shell Group has a 66 percent stake in Equilon, a joint venture with Texaco in the Midwest and West, and a 35 percent share of Motiva, an East Coast venture in which both Texaco and Saudi Refining Co. own 32.5 percent. Combined, the two ventures own more than 22,000 gasoline stations and eight refineries.

    People familiar with the situation told the Journal Texaco is asking for about $5 billion, including assumption of its roughly $1.8 billion in venture debt, for its minority stakes. Shell so far has been willing to pay only about $3 billion, including debt, say people familiar with the talks.

    The distance between Shell and Texaco isn't seen as likely to scuttle Chevron's acquisition, because ultimately, people familiar with the talks say, Texaco will do what is necessary to get the Chevron deal done. "This could rain on the wedding," said Fadel Gheit, an analyst with Fahnestock & Co. "But it will not postpone or cancel it."

    A spokesman for Texaco declined to comment on the talks, except to say that "there is a considerable difference between the two sides." He said the company "remains confident" it can complete the merger with Chevron, based in San Francisco, by mid-October, the report said.

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