LyondellBasell Industries NV is considering strategic options for the future of subsidiary Houston Refining LP’s 268,000-b/d full-conversion refinery on the Houston Ship Channel, including a potential sale of the asset.
“While the Houston refinery is a valuable, well-performing asset, we have long held the belief that it may be even more valuable as part of a larger refining system,” said Bob Patel, LyondellBasell’s chief executive officer, on Sept. 8.
“To that end, we are actively gauging market interest in this business with the goal of delivering the greatest value to all our stakeholders,” according to Patel.
Bank of America and Vinson & Elkins LLP, respectively, are acting as LyondellBasell’s financial and legal counsel for the possible refinery divestment.
Alongside declining to provide any assurances regarding the outcome or timing of the potential sale process, LyondellBasell also said it does not intend to make further announcements regarding the matter unless and until it is required or appropriate.
One of the largest refineries in the US and the operator’s sole refining asset, the LyondellBasell’s Houston refinery is configured primarily to process historically lower-cost heavy, high-sulfur crude oil purchased on the open market on a spot basis as well as via supply agreements with producers in Canada, Mexico, and other destinations abroad with heavy crude production, the company said in its 2020 annual report to investors.
While the refinery also can process other crudes of varied qualities and sources available at the US Gulf Coast, rising US production of predominantly light sweet crude in recent years has since narrowed the price difference between light and heavy grades, reducing LyondellBasell’s previous cost benefit in sourcing the refinery’s principal heavy crude feedstock.
In its 2020 annual report to investors, LyondellBasell said its Houston refining segment recognized a noncash impairment charge of $582 million in third-quarter 2020 resulting from expectations of a prolonged period of reduced demand and compressed margins that would decrease profitability for its production of transportation fuels.
While reduced profitability primarily at the time specifically related to impacts of COVID-19 and associated reductions in mobility affecting the global economy, the company said it expected the refinery to continue to be adversely affected by lower discounts for heavy crude feedstocks processed at the site.
In addition to deferring non-safety related discretionary activities and reducing the site’s workforce by about 10% via early retirements and internal transfers to help manage segment costs, LyondellBasell said it planned to operate the Houston refinery at about 80% of nameplate capacity during first-quarter 2021 as it continued to evaluate options regarding sourcing of crude feedstock and optimizing the site’s production.
