BP to sell or trim capacity at three refineries

British Petroleum Co. plc last week disclosed a plan to sell or reduce capacity at its three least profitable refineries.

The move will leave the company with 11 refineries around the world with total crude distillation capacity of 1.4 million b/d.

Two wholly owned refineries will be offered for sale: the Lima, Ohio, plant with 160,000 b/d capacity and 455 workers, and the Lavera refinery in southern France with 200,000 b/d capacity and 620 workers.

At the Nerefco refinery in Rotterdam, owned 65% by BP and 35% by Texaco Inc., crude distillation capacity will be trimmed by 70,000 b/d, and gasoline production capacity will be cut by 20,000 b/d.

BP Chief Executive John Browne said the move will bring BP's world refining capacity to sales ratio in line with other key refiners, most of whom refine less than they sell.

Much of the output from the Lima refinery is surplus to BP's requirements. BP's other Ohio refinery, at Toledo, will supply the company's products requirements in the U.S. Midwest.

At Lavera, output is twice BP's need for marketing and petrochemical feedstocks in southern France. The company said it will arrange to safeguard its products and feedstocks requirements in the region.

Rotterdam's Nerefco operation is on two sites, Pernis and Europoort, with a combined 420,000 b/d throughput capacity. Nerefco will shut down the Pernis plant and continue processing at the larger Europoort refinery. The partners plan a $220 million upgrade there to yield a more marketable mix of products.

What it will cost

BP expects the moves to cost $1.075 billion: $610 million for losses on sales and plant closure and $465 million in environmental remediation and other costs. The costs will be written off as an exceptional charge in BP's fourth quarter results to be announced Feb. 13.

"We have decided to take a radical and comprehensive step to reposition our refining portfolio," Browne said. "We are determined that it should contain only assets that, in regional terms, are among the top 25% in efficiency and profitability.

"Thanks to an investment program of $1.3 billion over the last 3 years, six of our refineries are already in this category. With modest but carefully targeted future investment, we believe the remaining five can be brought to a similarly advantaged position."

A BP official said the six refineries already in the top 25% of their regions are wholly owned units at Bulwer Island and Kwinana in Australia and at Alliance in Louisiana and partly owned plants at Whangerai in New Zealand, Durban in South Africa, and in Singapore.

The five with top 25% potential are wholly owned refineries at Grangemouth in Scotland, Castellon in Spain, and Toledo in Ohio and partly owned plants at Ingolstadt in southern Germany and Nerefco in Rotterdam.

Last week's announcement followed BP's decision late in 1995 to sell its 190,000 b/d Marcus Hook refinery in Pennsylvania to Tosco Corp.