Chevron May Sell Refineries, Valero Keeps Two

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Chevron May Sell Refineries, Valero Keeps Two

SAN RAMON, Calif. -- Chevron Corp., the world’s fourth- largest oil company, could sell some refineries as demand for gas and diesel is cut and fuel-production margins are lower as recessions cripple world economies, Bloomberg News reported.

Instead, the company wants to focus on higher-profit ventures such as natural-gas production on offshore Australia and oil developments in the Gulf of Mexico and West Africa, according to John Watson, executive vice president of strategy and development, who spoke at an energy conference in New York sponsored by Merrill Lynch & Co., the report stated.

Watson declined to say the names or number of refineries may be sold, the report stated. Chevron’s refining profit fell 59 percent during the first nine months of 2008, and its refining unit contribution to total profit slid to 7.1 percent during the first three quarters, from 24 percent a year earlier, according to Bloomberg News.

"It’s shaping up to be a difficult year for the refining business," he said. "The margin environment has been relatively weak."

Chevron operates or owns stakes in 18 plants that can process 2.94 million barrels of crude per day, the report stated.

On the retail marketing side, Chevron plans to continue divesting its retail fuel stations and distribution networks in low-profit markets, Watson said during the presentation. By doing so, annual operating costs will be cut by $700 million, Watson stated.

"Our refining rationalization has been somewhat more limited" than sales of retail outlets, Watson said during the presentation.

Meanwhile, the largest refiner in the U.S., Valero Energy Corp., took two refineries off the sales block, but will continue efforts to sell a third, a spokesman told Dow Jones Newswires yesterday.

Valero will retain its 180,000 barrel-a-day Memphis refinery and its 87,400 barrel-per-day Ardmore, Okla., refinery, the report stated. The two were put on the block in 2007 as part of a strategic review, but the company will continue to market its 255,000 barrel-a-day Aruba refinery, according to the report.

"Memphis and Ardmore are no longer under strategic review," Valero spokesman Bill Day told Dow Jones.

The move indicates San Antonio, Texas-based Valero concluded a period of focus on divesting underperforming assets, the report stated.

"We had said when we started the process that we would seek alternatives for the refineries and do whatever deal was in the best interest of our shareholders," Day told the news service. "Ending the strategic review is the best option that is in the strategic interest of our shareholders."