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Shell Sells Share In Deer Park Refining

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Shell Oil is to sell its interest in Deer Park Refining Limited Partnership, a 50-50 joint venture between Shell Oil Company and P.M.I. Norteamerica (a subsidiary of Petroleos Mexicanos, or Pemex) for $596m. 

The transaction will transfer Shell’s interest in the partnership, and therefore full ownership of the refinery, to Pemex, subject to regulatory approvals.

“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.”

The Deer Park Refinery, in Texas, has a crude oil capacity of 340,000 barrels per day (bpd). The refinery processes crudes from Mexico, Canada, the US, Africa, and South America. Products produced by the refinery include gasoline, aviation fuels, diesel fuels, ship fuel and petroleum coke. 

The consideration is a combination of cash and debt, plus the value of hydrocarbon inventory, which will be valued at closing based on actual volumes and prevailing market prices. The current value of the hydrocarbon inventory would range from $250 to $350m in cash assuming current market prices and historic inventory volumes under normal operating conditions.

The transaction allows Shell to further focus its refining footprint while also maintaining integration optionality and retaining value through its chemicals and trading activities. Shell Chemical will continue to operate its 100% owned Deer Park Chemicals facility located adjacent to the site.

Shell said that the US will remain a key manufacturing hub globally for the company. It will retain a meaningful presence in Texas through its chemicals facility in Deer Park and its activities in the Permian Basin, in Louisiana through its integrated refining and chemicals site at Norco, its chemicals facility at Geismar, midstream infrastructure assets, branded retail presence, Gulf of Mexico operations and offices in Houston and New Orleans. It will also maintain its marketing presence and continue to honor branded wholesale agreements within the Gulf Coast region. In addition, Shell will continue to invest in its Pennsylvania chemicals project.

The transaction is expected to close in Q4 2021.

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