El Paso Corporation (EP)

[NovoMira]

Petrobras seeks to buy Valero refinery in Aruba

Tue Apr 15, 2008
By Denise Luna

RIO DE JANEIRO, April 15 (Reuters) - Brazil's state-run oil company, Petrobras (PETR4.SA:)(PBR.N:), will resume talks this month to buy a refinery in Aruba owned by independent U.S. refiner Valero Energy Corp (VLO.N:), a Petrobras director said on Tuesday.

Jorge Luiz Zelada, director of international operations, said the company was not interested in other assets of the top U.S. refining company. "There has been an accident at the Aruba refinery recently and it is being repaired. We expect to resume the talks in April and inspect the refinery's installations," Zelada told reporters.

Sources familiar with the talks between the two companies said Petrobras had agreed to buy the 275,000 barrels per day (bpd) Aruba refinery for about $2.8 billion before the Jan. 25 fire in a vacuum distillation unit, which does the initial breakdown of crude oil in the refining process.

A Valero spokesman declined to discuss Zelada's statements or comment about possible buyers or a sale price for the refinery. Repairs at Valero's refinery on the Caribbean island of Aruba were scheduled to be completed this month. Petrobras won't take possession of the refinery until the repairs are complete, the sources said.

Valero, which has a combined throughput capacity of 3.1 million barrels per day at 16 refineries, said last month it was considering selling nearly a third of its North American refineries. Aruba along with other refineries Valero has said it would consider selling are less nimble in processing high-sulfur, high-density cheaper crudes in motor fuels that meet tight U.S. environmental rules and are not located near major bodies of water.

The Aruba refinery does not have a catalytic cracking unit to make gasoline. Valero has used the refinery as a producer of intermediate feedstocks that are shipped to other refineries to make finished products.

Valero purchased the refinery from El Paso Corp (EP.N) for $465 million in 2004. More than $640 million has been invested in upgrading the plant in past five years, according to Valero's Web site. "Whoever buys is buying a lot of headaches," said a source. "Petrobras fortunately has a lot of money. They're going to have to spend a huge amount of money there."

In addition to upgrades to the refinery itself, the Aruba refinery faces difficulties with its electrical power supply. Petrobras has recently bought a refinery in Okinawa, Japan, and is also expanding its refinery in Pasadena, Texas.

Zelada also confirmed Petrobras made a bid for Exxon Mobil Corp's (XOM.N:) Esso-brand network of service stations in Brazil. While it awaits a response, Petrobras also plans to start negotiations to buy Esso networks in Chile and Uruguay, he said.