How Will Motiva's Retail Assets Be Divided?

Shell, Saudi Refining Inc. working on separation deal

Saudi Aramco Shell Motiva

HOUSTON -- Saudi Arabian Oil Co. (Saudi Aramco), through its Saudi Refining Inc. (SRI) subsidiary, and Royal Dutch Shell plc, through its U.S. downstream affiliate, have signed a non-binding letter of intent to divide the assets of Motiva Enterprises LLC.

The companies formed the Motiva joint venture in 1998, and it has operated as a 50/50 refining and marketing joint venture between them since 2002.

Based in Houston, Motiva refines, distributes and markets petroleum products. With three refineries in the U.S. Gulf Coast region, Motiva has a combined capacity of more than 1.1 million barrels per day. The company's marketing operations support a network of approximately 8,300 Shell-branded gas stations in the eastern and southern United States.

The partners will evaluate options and select an optimal deal structure with the objective of formalizing a definitive agreement to divide and transfer Motiva's assets, liabilities and employees between the companies. The parties will divide distribution terminals, retail assets and branded and commercial customer agreements by geography in such a way to ensure that each partner has an "integrated and robust business," they said.

In the proposed division of assets, Houston-based SRI will retain the Motiva name, assume sole ownership of the Port Arthur, Texas, refinery, retain 26 distribution terminals and have an exclusive license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets. Shell will assume sole ownership of the Norco, La., refinery where Shell operates a chemicals plant, the Convent, La., refinery, nine distribution terminals and Shell branded markets in Florida, Louisiana and the Northeast.

SRI will have exclusive use of the Shell brand through a long-term license agreement in its area of operation.

"Motiva's performance has been transformed in the last two years," said John Abbott, downstream director of Shell Oil Co., Houston. "We propose to combine the assets we will retain from the joint venture with Shell's other downstream assets in North America. This is consistent with both the group and downstream strategy to provide simpler and more highly integrated businesses which deliver increased cash and returns."

Abdulrahman F. Al-Wuhaib, senior vice president of downstream for Saudi Arabia-based Saudi Aramco, said,

"Saudi Aramco subsidiaries and affiliates have had a presence in the U.S. for over 60 years, and the Motiva joint venture with Shell has served our downstream business objectives very well for many years; however, it is now time for the partners to pursue their independent downstream goals.

He continued, "The Port Arthur refinery will advance Saudi Aramco's global downstream integration strategy through supply and trading, refining and fuels marketing, chemicals and base oils. Motiva's employees will continue to be critical to fulfilling our future growth potential in the Americas, reinforcing our reliable customer service and supporting the communities where we operate. We fully support Motiva's continuing transformation journey to become an autonomous integrated downstream affiliate."

Dan Romasko, Motiva president and CEO, said: "Motiva has benefited greatly from the nearly two decades of support and resources provided by Shell and Saudi Aramco. While the parties work towards definitive agreements, Motiva will remain focused on our growth agenda, running operations in a safe, environmentally sound and efficient manner while continuing to reliably serve our customers."