London: Royal Dutch Shell has asked Saudi Aramco for up to $2 billion as part of the breakup of their giant Motiva Enterprises refining joint venture in the US.
The payment would be compensation for the Saudi company retaining a larger share of the nearly two decade-old JV.
Its split was announced in March and is expected to be completed in October but disagreements over the payment could postpone the final date, sources close to the talks told Reuters.
Under the agreement announced in March, Aramco will take control of Motiva’s largest US refinery in Port Arthur, Texas, and retain 26 distribution terminals.
That underscored Aramco’s strategy to expand its global refining footprint in order to secure markets for its crude oil and could also be part of its ambitious public
offering plan.
Shell will become the sole owner of Motiva’s Louisiana refineries in Convent and Norco, where it also operates a chemicals plant, as well as Shell-branded petrol stations in Florida, Louisiana and the northeastern US.
Shell is focusing on developing its global chemicals business but also plans to sell $30bn of its assets by 2018 to finance its $54bn acquisition of BG Group in February, which will include several refining assets.
The Anglo-Dutch company is seeking 1bn to 2bn dollars from Aramco to compensate for the Saudi company keeping a bigger stake in the JV, two sources close to the talks said.
Aramco nevertheless believes the fee should be significantly lower, they
added.
An Aramco spokesperson said the company does not comment on speculation.
Shell has indicated in the past it will receive a cash payment from Aramco as part of the deal, but the size of the cash consideration has not been disclosed before.
The payment is primarily due to Aramco retaining a larger refining capacity than Shell – the Port Arthur plant can process 603,000 barrels per day (bpd) while the two Louisiana plants jointly have a combined 473,000 bpd capacity.
The Texas refinery is also considered more advanced after extensive upgrading in recent years.
Additional infrastructure such as storage tanks and pipelines will also be included in the payment.
Refineries are generally valued according to the quality of the units as well as the outlook for its profit margins.
Aramco has rapidly expanded its corporate headquarters in Houston and has hired several new traders in recent months, according to several sources.
Motiva’s refined product trading business was separated from Shell’s trading business in Houston in June 2015.
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