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* Chevron solicits interest in Burnaby, British Columbiarefinery
* Shell seeks buyer for Martinez, California plant - sources
By Jessica Resnick-Ault
NEW YORK, June 17 (Reuters) - Global oil majors Chevron Corp and Royal Dutch Shell Plc are putting smallrefineries on the auction block as they look to trimlower-margin assets in the face of headwinds from rising crudeoil prices.
Chevron, the second largest U.S. oil company, is solicitinginterest in its Burnaby, British Columbia, refinery and gasolinestations, the company told Reuters. Shell is looking for buyersfor its Martinez, California, refinery, two people familiar withthe situation told Reuters. Shell declined to comment.
These two companies, along with peers Exxon Mobil Corp and BP Plc, have sold more than a million barrelsper day of U.S. refining capacity in the past three years,according to Stratas Advisors, a Houston-based consultancy.
The world's five largest oil majors together still haveenough U.S. capacity to refine about 4.7 million barrels perday.
Refining profit margins have declined from highs seen in2015, and the fear is that as crude prices recover from atwo-year rout, refiners will be squeezed as the cost of oilrises but the price of gasoline does not keep pace. Selling theplants while margins are still reasonably high allows the majorsto exit without a hit to their balance sheets.
Chevron also told Reuters it has retained Rothschild & Co tomarket its 75 percent stake in a South Africa refinery. Thefifth oil major, Paris-based Total SA, retained Lazardto sell a 50 percent stake in its sole U.S. refinery, but wasunable to secure the price it desired, according to sources.
Refining has remained a profitable sector during a two-yearoil price rout, so these plants can fetch a relatively higherprice than exploration and production assets. Chevron and Shellhave the highest cash-flow deficits, said Lysle Brinker,director of equity research at IHS Energy, and so have the mostmotivation to sell.
The two companies have been investing in other areas oftheir business - Shell plunked down $53 billion to buy BG Groupearlier this year, while Chevron has spent heavily onlarge-scale liquefied natural gas projects.
"They're much more strapped for cash, and they'reaccelerating the sale of assets that will get pretty decentprices," said Brinker. "A lot of the asset sales that the bigguys have been selling are downstream and midstream, becausethose have been sought-after by private equity and othersbecause there's more steady cash flow."
These assets may prove to be a better fit for smaller buyersthat focus on particular regions, such as the North AmericanWest Coast, or companies that concentrate on global storage andtrading, but not oil production.
SMALLER ASSETS ON BLOCK
While the majors plan to continue to operate large,profitable refineries that are well integrated with their oilproduction assets, refineries outside of that footprint arelikely to be sold, Brinker said.
Chevron's downstream strategy has focused on running largescale refineries that can serve markets in the United States andAsia and on operating petrochemical plants that produce veryprofitable products.
The refinery in British Columbia, however, refines lightoil, rather than heavy crude from Canada's oil sands, and itsproducts are distributed in a smaller region around BritishColumbia and down through Washington state.
Selling smaller assets like that is likely something mostcompanies are looking at - or should be - said Mark Routt,chief economist for the Americas with KBC Advanced Technologiesin Houston.
"Far better to sell it when it's good times than bad times,"Routt said. "It's not as good as it was in '15, but it's stillgood times."
Chevron in April agreed to sell its 54,000 barrel-per-dayKapolei, Hawaii, refinery to a group backed by private equity,and Shell agreed in March to exit its Motiva Enterprises jointventure with Saudi Aramco. Shell is shedding a plant in Texas asa result of the dissolution of that venture.
Chevron previously said it would sell its 75 percent stakein its South African unit, which includes a refinery in CapeTown. (Reporting By Jessica Resnick-Ault in New York; Additionalreporting by Ron Bousso in London; Editing by Bill Rigby)
