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Valero Energy Corp., which operates 84 convenience stores in California, said yesterday that there was a strong likelihood U.S. antitrust officials would allow it to keep the two oil refineries in California that would come with its purchase of San Antonio-based Ultramar Diamond Shamrock Corp.
Valero unveiled plans to buy rival UDS, also an independent refiner, for $4 billion in cash and stock in May, which would make it one of the top independent oil refiners and marketers in the U.S. With the deal, it would acquire 2,500 retail stations and seven refineries, including the Wilmington and Golden Eagle plants in California.
Valero already owns the Benicia refinery in California, where high gasoline prices have often drawn concern from antitrust regulators at the U.S. Federal Trade Commission (FTC). But Keith Booke, Valero's chief financial officer, told the Associated Press that the company will argue to the FTC that the UDS acquisition could lower gasoline prices in the state.
Valero plans to tell the FTC that it will likely import much of its crude oil from foreign sources, creating more competition in a market typically dominated by crude oil from Alaska. The competing crude oil -- which could be imported from Saudi Arabia among other places -- should lower overall oil and gas prices, Booke said.
Valero will control roughly 20 percent of the crude oil purchased and processed in California, assuming it is allowed to keep the two refineries owned by UDS. "If you back out a couple of hundred barrels a day of Alaskan North Slope crude oil, it will have an impact on market prices," Booke said.
Moreover, the company "has a track record of enhancing operations at refineries and increasing production of gasoline," which could also mean lower pump prices, Booke added.
Booke said the company hopes to close the deal in the fourth quarter, with shareholders expected to vote on it sometime in September.