Photo courtesy of Shell
Shell Oil Company, a subsidiary of Royal Dutch Shell plc, has reached an agreement to sell its stake in Deer Park Refining Limited Partnership, a 50-50 joint venture between Shell Oil Company and P.M.I. Norteamerica, S.A. De C.V. (a subsidiary of Petroleos Mexicanos or Pemex). The transaction will transfer Shell’s interest in the partnership, and therefore full ownership of the refinery, to Pemex, subject to regulatory approvals.
The Deer Park Refinery has a crude oil capacity of 340,000 barrels per day. The refinery processes crudes from Mexico, Canada, the U.S., Africa and South America. Products produced by the refinery include gasoline, aviation fuels, diesel fuels, ship fuel and petroleum coke.
Shell Chemical L.P. will continue to operate its 100% owned Deer Park Chemicals facility located adjacent to the site. Employees assigned to the refinery will be offered employment by Pemex, while employees assigned to the chemical plant will continue employment with Shell. Pemex will recognize the United Steel Workers and adopt the Collective Bargaining Agreement.
Mexico’s President Andres Manuel Lopez Obrador has recently criticized the state-owned oil company’s partnership with Shell as not having yielded any benefits for Mexico since it was established in 1993. Pemex sells Maya heavy crude to Deer Park through a long-term supply contract. Pemex and Shell agreed to extend the term of the Maya contract in 2018, halving the supply of more than 150,000 bpd, and negotiating a fixed price starting in 2023, according to media reports.
“Shell did not plan to market its interest in the Deer Park refinery; however, following an unsolicited offer from Pemex, we have reached an agreement to transfer our interest in the partnership to them,” said Huibert Vigeveno, Shell’s Downstream director. “Pemex has been our strong and active partner at the Deer Park Refinery for nearly 30 years, and we will continue to work with them in an integrated way, including through our on-site chemicals facility, which Shell will retain. Above all, we remain committed to the wellbeing of our employees and will work closely with Pemex to ensure the continued prioritization of safe operations. We’re proud of our 90-plus year history as an operator and neighbor at Deer Park and we will continue to play an active role in the community.”
The consideration for this transaction is USD596 million, which is a combination of cash and debt, plus the value of hydrocarbon inventory. The hydrocarbon inventory will be valued at closing based on actual volumes and prevailing market prices. The current value of the hydrocarbon inventory would range from USD250 to USD350 million in cash, assuming current market prices and historic inventory volumes under normal operating conditions.
Shell says the divestment of its interest in the Deer Park refinery allows it to further focus its refining footprint, while also maintaining integration optionality and retaining value through its Chemicals and Trading activities. The transaction is expected to close in the fourth quarter of 2021.
Recently, Shell Philippines Exploration B.V. announced that it has sold its 45% share in Service Contract (SC) 38 in Malampaya deep water gas-to-power to Udenna Corp., which already owned a 45% stake in the project located in the Philippines. The remaining 10% belonged to state-run Philippine National Oil Corp. (PNOC). Udenna Corp. is the holding company which owns independent petroleum marketer Phoenix Petroleum Philippines. The transaction was valued at USD380 million, with additional payments of up to USD80 million between 2022 and 2024.