09 March 2011 18:09 [Source: ICIS news]
HOUSTON (ICIS)--Global refining and downstream mergers and acquisition (M&A) 2010 activity increased by 30% year on year to $36bn (€25.9bn) as demand for gasoline increased and oversupply led to bargain prices for buyers, according to a study by US consultants released on Wednesday.
In particular, total deal value rose sharply in the fourth quarter of 2010, as refining margins began to improve and buyers took advantage of favourable prices in a depressed market and an oversupply of properties, the report said.
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As defined by the study, the refining sector includes petrochemical facilities, terminals and storage, propane distribution and diversified downstream interests, such as refining/terminals/service stations.
“An improving economy, particularly in the US and North American markets, is driving a slow but steady increase in gasoline consumption, along with the demand for oil and refined products,” said Cynthia Pross, senior analyst for M&A research at IHS.
“With continued high global construction costs, M&A was a relatively-inexpensive way for refiners to quickly add capacity to meet demand and take advantage of higher margins,” she added.
The $36bn in global M&A refining deals was below the $45bn recorded in 2008.
Excluding value, total M&A deals slipped to 59 in 2010, down by almost 12% from 67 in 2009, and 66 in 2008.
Terminals/storage and natural gas distribution led the deal count with 18 and 11, respectively.
On the refining side, Petrobras’s 2010 acquisition of a 30% interest in the Alberto Pasqualini refinery in
The Petrobras deal resulted from the Brazilian government’s mandate to reduce dependence on fuel imports, the consultants said.
“On the sales side, we continued to see major, integrated oil companies pare their downstream operations and sell less strategic assets, a trend that we have seen during the past several years," Pross said.
The number of transactions also reflected the desire by companies to acquire refining assets at bargain prices, since, during the economic downturn, a number of facilities were either shut down or operating below capacity, the report said.
For Valero, the selling of its two east coast refineries should allow it to focus on its more lucrative US Gulf coast market, where it has “larger, more-complex plants that can process multiple crudes, including heavy oil from Canada, as well as secondary products that have higher margins”, according to the consultants.
However, oversupply may still spark deals there in 2011.
“A number of refining assets are available for sale in
“This is a situation that we don’t see improving significantly in the near term. While demand is up slightly, it is still weak, and there continues to be over-capacity and high inventory levels.”
The CERAWeek 2011 conference lasts through Friday.
($1 = €0.72)
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