Damaged Torrance Exxon refinery sold; gas prices unlikely to drop soon

1 Oct 2015 | Author: | No comments yet »

Damaged Torrance Exxon refinery sold; gas prices unlikely to drop soon.

PBF Energy (NYSE:PBF) +8% AH after agreeing to acquire the 155K bbl/day Torrance, Calif., refinery and related logistics assets from Exxon Mobil (NYSE:XOM) for $537M. LOS ANGELES (AP) — Exxon Mobil Corp. is selling its troubled Southern California refinery for $537 million to a New Jersey energy company more than six months after an explosion crippled the plant and led to higher gas prices in the Golden State, according to an announcement Wednesday.A New Jersey-based oil refining company announced Wednesday that it will acquire Exxon Mobil’s damaged Torrance plant for $537.5 million, after repairs have been completed early next year.The 750-acre refinery has been under scrutiny by local and state regulators since a massive explosion at the facility in February touched off the equivalent of an 1.7 earthquake. PBF Energy Inc., one of the largest independent oil refiners in North America, said it will purchase the Torrance plant that can produce 155,000 barrels of oil a day.

The Torrance refinery provides 10% of the state’s capacity and 20% of the capacity in Southern California, and the explosion forced XOM to cut production to less than 20%, causing the spike in gas prices. Exxon Mobil said in its announcement that it expected the company, which has long admitted having an eye on moving into California, to take control of the refinery by mid-2016. PBF Energy, a Fortune 200 company on the New York Stock Exchange, based in Parsippany, N.J., said Torrance will be the smallest in its fleet of three existing refineries and will be the fifth plant in the company’s operations. Coupled with its previously announced Chalmette acquisition, PBF says it will have increased its refining capacity by more than 60% to ~900K bbl/day and added meaningful Gulf coast and west coast assets to its refining system.

The shutdown led to a shortage of gas that meets California’s stricter pollution regulations and caused higher prices at the pump for drivers in the state. The sale also includes other storage facilities and pipelines, including a 116-mile section that delivers San Joaquin Valley crude to the refinery and pipes that provide access to the Ports of Long Beach and Los Angeles. Rumors of a sale have circulated since last year when Reuters reported that ExxonMobil was trying to sell four U.S. refineries not associated with neighboring chemical plants. Exxon and the refinery have faced mounting criticism in the subsequent months, as the company ignored or refused to cooperate with several subpoenas from the U.S. Exxon Mobil recently stopped working on a plan to restart the refinery using an old ESP with greater emissions, and now the plan is to restore the refinery to its original state, although that work is unlikely to be completed until sometime early next year.

While some local authorities downplayed the seriousness of the incident, the leak is under investigation by Cal/OSHA, and it has underscored ongoing safety concerns in surrounding neighborhoods. Exxon Mobil proposed a short-term fix that involved use of an old pollution control system, but the company remained at loggerheads with regulators at the South Coast Air Quality Management District.

Last year, PBF Energy executives said they were interested in expanding into California, while Exxon Mobil had previously disclosed it was planning to sell some refining assets even before the February explosion. The California Occupational Safety and Health Administration shut down the larger unit that houses the affected equipment, citing an imminent hazard until the company demonstrated that it could be safely run. Under normal operating circumstances, the Torrance facility refines about 20 percent of Southern California’s oil, but in recent months, the plant’s output has dwindle to a fifth of its permitted capacity. While not as severe as the Torrance incident, PBF’s Delaware City refinery had a fire in August that has required it to operate at a reduced capacity. Maxine Waters (D-Los Angeles) and Ted Lieu (D-Torrance) added to the pressure on Exxon in a letter to the company’s chairman, Rex Tillerson, two weeks ago.

Californians have been paying about 70 cents a gallon more than the rest of the country; in Los Angeles on Wednesday, gas is about 82 cents above the national average, according to the AAA Fuel Gauge Report. PBF’s Dill said the company intends to offer jobs to the hundreds of employees working for ExxonMobil in Torrance now, including members of United Steelworkers 675 and the International Brotherhood of Electrical Workers.

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