14 July 2011 22:09 [Source: ICIS news]
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HOUSTON (ICIS)--US-based oil producer and refiner ConocoPhillips will continue considering the divestment of its smaller, less sophisticated refineries as it decides what will happen to its stake in its Chevron Phillips Chemical joint venture, the chief executive said on Thursday.
"We want the most sophisticated, most competitive refineries, so the number of refineries will either be shut down, sold or ventured in a way to accomplish this," said Jim Mulva, ConocoPhillips chief executive. He made his comments during a conference call.
ConocoPhillips owns or has a stake in 12 refineries in the US, and owned or had an interest in five refineries outside the US as of 31 December, according to the company’s annual report.
The separation should be completed in the first half of 2012, the company said. Once the deal is completed, Mulva intends to retire as CEO.
Once split off, ConocoPhillips's refining company will be the second largest independent refiner in the US, behind Valero.
Chevron Phillips Chemical is a 50:50 joint venture that includes the chemical assets of ConocoPhillips and Chevron.
ConocoPhillips had not taken any decision on the joint venture, Mulva said. ConocoPhillips will determine what will happen to the joint venture during the next several months, he said.
Chevron Phillips Chemical produces olefins, polyolefins, aromatics and styrenics.
Regarding the rationale for the split, CEO Mulva said the management of each company could provide more focus and attention to the upstream and downstream operations.
Also, "there is generally greater external transparency of the business performance when the marketplace looks at the pure plays versus being accomplished in the integrateds", he said.
The resulting downstream business will have a strong balance sheet, strong investment-grade credit and financial flexibility, Mulva said.
"We see a unique position of this downstream company to process heavy Canadian oil and nonconventional oil, particularly in the middle continent part of the US," he said.
However, the downstream company's refining capacity will be reduced as part of a strategy "of making sure that we are moving to the very best, most sophisticated, most value-creating refineries", Mulva said.
As the first step of the spinoff, ConocoPhillips will move the downstream assets to the new company, a process that will take 4-5 months, Mulva said.
At the end of this year, ConocoPhillips will seek a ruling from the Internal Revenue Service (IRS), a process that should take a further 3-4 months, he said.
ConocoPhillips is the second integrated oil producer and refiner to recently pursue a split up.Earlier this year, Marathon Oil's board of directors approved a plan to split its refining business from its E&P business.
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