Dogged by multibillion-dollar bills from multiple disasters, British Petroleum has announced the sale of its notorious Texas City refinery to Ohio-based Marathon Petroleum Corp.
The $2.5 billion sale—BP’s second refinery sell-off in recent months—will help the company distance itself from the refinery’s dark past and provide cash to help pay BP’s continuing costs from the 2010 Deepwater Horizon disaster.
U.S. Chemical Safety Board
“Warning signs of a possible disaster were present for several years, but [BP] officials did not intervene effectively to prevent it,” federal investigators said.
The vast facility, known as BP America, is the site of a March 2005 series of explosions that killed 15 employees and injured more than 180 people. Two other serious accidents followed in the next several months, causing tens of millions of dollars in damage.
The sale will put one of the largest, most complex refineries in the United States in the hands of a U.S.-based firm and will make Marathon the nation’s fourth-largest refiner.
Pending approvals, the deal is expected to close early in 2013.
The 2005 refinery explosion occurred during the restart of a hydrocarbon isomerization unit.
In a scathing 2007 report, the U.S. Chemical Safety Board blamed the disaster on “organizational and safety deficiencies at all levels of the BP Corporation”—from mechanical and process issues at the plant to corporate shortcomings in the UK.
A Green Living / SymonSez
|BP’s costs for the 2005 refinery disaster are now close to $2 billion. The blast and fire killed 15 people and injured 180 people.|
“Warning signs of a possible disaster were present for several years, but company officials did not intervene effectively to prevent it,” the Safety Board said.
In September 2005, OSHA fined BP a then-record $21 million as a result of the accident. BP paid the fine, but when OSHA re-inspected in 2009, it found that BP had failed to correct hundreds of hazards.
Those lapses led to 270 failure-to-abate notices, which BP resolved with a $50.6 million fine in 2010; and 439 new willful violations, which BP settled earlier this year with a $13 million fine.
Cost of a Disaster
In addition to the $84-plus million in OSHA fines, BP’s tab from the disaster also includes:
• More than $2 billion to settle lawsuits and fines stemming from the explosion;
• More than $1 billion on safety and infrastructure improvements; and
• $500 million in fixes under a 2010 agreement with the Occupational Safety and Health Administration.
The $2.5 billion sale price includes $598 million for the refinery, related pipelines and some retail contracts; $1.2 billion for the plant’s inventory of oil, gas and refined fuels; and a $700 million “earnout provision.”
The facility includes three intrastate NGL pipelines originating at the refinery, four terminals, and a 1,040 megawatt cogeneration (cogen) facility.
All in all, analysts called it a good deal for the 451,000-barrel-a-day facility, which has 2,150 employees. Marathon agreed.
|Marathon Petroleum Corp. already owns an 80,000-barrel-a-day refinery on Galveston Bay in Texas City, TX.|
“This is a unique opportunity to acquire world-scale refining assets at an attractive price,” Marathon Petroleum CEO Gary Heminger said during a conference call with analysts Monday (Oct. 8) morning. “These refining and related assets strategically complement our existing business and provide the immediate scale for us to expand our Marathon brand business even further in the Southeast.”
“Marathon got themselves a deal,” Fadel Gheit, an analyst with Oppenheimer & Co., told Bloomberg Businessweek. “The Texas City refinery was refurbished after the fatal accident, and much of the equipment is pretty new. They are getting a refinery that needs relatively little maintenance.”
Growth and Reassurances
Based in Findlay, OH, Marathon Petroleum Corp. (MPC) currently operates six refineries throughout the Midwest and Southeast that produce nearly 1.2 million barrels of crude oil per day. The network includes another plant in Texas City.
Heminger said the acquisition would complement the company’s current geographic footprint and significantly expand its presence in those regions.
He also sought to reassure Texans that the disasters of yesteryear would not be repeated.
“We have a long-standing commitment to safe and environmentally conscious operations,” he said.
“BP has made significant investments to improve the safety, reliability and environmental performance of the refinery in recent years. We will leverage those investments in the refinery with our continuing focus on safe and reliable operations.
“In addition, we have been a part of the Texas City community for many years through our Texas City refinery, and this acquisition will deepen our commitment to that area.”