By Alison Sider and Kejal Vyas
Exxon Mobil Corp. and the national oil company of Venezuela are
ending their business partnership, as they are selling a jointly
owned Louisiana refinery for $322 million to PBF Energy Inc.
Once the deal closes, Exxon will no longer have any joint
ventures with Petróleos de Venezuela SA. Jesus Luongo, PDVSA'S vice
president of refining, said the plant no longer "aligned with the
commercial policies of the company and the country."
ExxonMobil Refining & Supply Co. still has six refineries
across the U.S. that can process more than 1.8 million barrels of
oil a day into fuels such as gasoline and diesel. Two of the
biggest are located in the on the Gulf Coast in Texas and
Louisiana.
PBF, which is based in New Jersey, runs three refineries on the
East Coast and in Ohio. The company called the deal a significant
step in its expansion, which allows it to plant a flag on the Gulf
Coast.
The Chalmette refinery, located 10 miles southeast of New
Orleans, can process up to 189,000 barrels a day of crude. It
primarily runs on oil pumped from the Louisiana coast and
Venezuela. Once PBF adds this fourth refinery to its U.S. portfolio
of plants, the company will be able to refine more than 725,000
barrels a day of oil into fuels.
"We will have increased our refining capacity by 35%," said Tom
Nimbley, chief executive of PBF.
For Exxon and PdVSA, the deal marks the end of a decadeslong
rocky history.
The refinery sale comes a week after a World Bank arbitration
court denied Venezuela's attempt to annul a $1.6 billion payment to
Exxon for oil-and-gas properties expropriated by the South American
government in 2007.
Barclays analyst Alejandro Arreaza said Venezuela might use
proceeds from the sale to help pay its debt to Exxon. "Selling
assets is definitely not something good for the long term because
you're splitting up parts of the company," he said, adding the sale
offers minor but much needed relief for the oil-exporting nation as
it grapples with a severe economic crisis amid low oil prices.
Venezuela has burned through nearly a third of its international
currency reserves since the beginning of March, raising concerns of
a possible debt default. The country depends on oil sales for 96%
of its income, but the international price of oil has fallen more
than 40% since last summer to less than $65 a barrel. Venezuelan
crude, which tends to be thicker and harder to refine, sells for
much less.
The Louisiana refinery's performance has been handicapped by
Exxon and PDVSA'S joint venture arrangement, PBF said. The company
said it would continue to import some Venezuelan crude, but won't
allow a supply agreement with PdVSA to limit its ability to run the
plant more profitably. Similar heavy crude oils from Mexico and
Canada are readily available in the region.
PBF also plans to buy more light, sweet crude pumped from nearby
U.S. shale fields to use in the refinery.
Tom O'Malley, chairman of PBF, told The Wall Street Journal last
year that he wanted to buy more refineries in the U.S. "We need to
be bigger, " he said at the time.
Shares of PBF rose nearly 14% Thursday on the news to close at
$29.97.
Angela Chen contributed to this article.
Write to Alison Sider at alison.sider@wsj.com and Kejal Vyas at
kejal.vyas@wsj.com
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