Tesoro Acquiring BP's Carson Refinery

The British energy company has been divesting itself of parts of its U.S. fuels businesses and still plans to sell its Texas City, Texas, refinery.

San Antonio-based Tesoro Corporation has agreed to buy BP's Carson, Calif. refinery, which is adjacent to Tesoro’s smaller Wilmington refinery, as well as the associated network of pipelines and storage terminals and about 800 ARCO-branded retail stations in Southern California, Arizona, and Nevada. Tesoro will pay $1.175 billion plus the value of inventory at the time of closing, and the company announced that inventory is currently valued at about $1.3 billion. Adding the 266,000 barrel per day refinery significantly boosts Tesoro's output, which is currently about 665,0000 barrels per day. BP has been divesting itself of parts of its U.S. fuels businesses and still plans to sell its Texas City, Texas, refinery. BP acquired the Carson Refinery, one of the largest refineries operating on the West Coast, when it bought ARCO in 2000.

The refinery began operating in 1938. Located on 650 acres in Los Angeles County near the Long Beach and Los Angeles harbors, it processes crude oil from Alaska's North Slope, the Middle East, West Africa, and other sources.

Tesoro is getting BP's 51 percent interest in a 400 megawatt cogeneration facility located at the refinery, three marine terminals, four land storage terminals, four product marketing terminals, and more than 100 miles of pipelines, including connected access to Los Angeles International Airport. The cogen facility provides electricity to the Carson Refinery and sells excess power to the local utility grid.

"This transaction is a unique opportunity for Tesoro to combine the best aspects of two West Coast refining and marketing businesses, resulting in a more efficient integrated refining, marketing, and logistics system," said Greg Goff, Tesoro's president and CEO. "Given Tesoro's existing operations on the West Coast and our understanding of the complexities and challenges of operating in California, we are well positioned to generate significant operational efficiencies, increase our ability to satisfy market demand, and reduce stationary source air emissions."

Tesoro's Aug. 13 announcement said Carson is a high conversion refinery with a Nelson complexity of 13.3, a track record of safe and reliable operations, and ranked in Solomon Associates benchmarking in the top quartile of U.S. refineries on a utilization and energy efficiency basis.

"Today's announcement is a significant step in the strategic refocusing of our US fuels business," said Iain Conn, chief executive of BP's global refining and marketing business. "Together with the intended sale of Texas City, this will allow us to focus BP's operations and investments exclusively on our three northern U.S. refineries, which are crude feedstock advantaged, and their large and important marketing businesses. As an established refiner and marketer, Tesoro provides a strong future for the business and for its employees," he added.

The deal is expected to close before mid-2013.

Tesoro currently operates seven refineries and a retail-marketing system of more than 1,215 branded retail fuel stations.

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