Watching Government A first: Shell plans to incorporate five refineries in U.S.

Jan. 22, 1996

One of the biggest refiners in the U.S. plans to break new ground in the business structure of its operations. Effective Apr. 1, Shell Oil Products Co., Houston, will convert five refineries with combined crude oil capacity of 764,100 b/cd to stand-alone corporations. Each will operate under a president and chief executive officer, reporting to its own board of directors. It is the first U.S. refiner to take such a bold step toward decentralization. Shell listed the goals of the program as "a

One of the biggest refiners in the U.S. plans to break new ground in the business structure of its operations.

Effective Apr. 1, Shell Oil Products Co., Houston, will convert five refineries with combined crude oil capacity of 764,100 b/cd to stand-alone corporations. Each will operate under a president and chief executive officer, reporting to its own board of directors.

It is the first U.S. refiner to take such a bold step toward decentralization.

Shell listed the goals of the program as "a stronger business focus, opportunities for financial improvement, and more direct accountability."

Each plant will remain wholly owned by Shell.

Marked for incorporation

Scheduled for incorporation are refineries at Anacortes, Wash., with capacity of 106,300 b/cd; Martinez, Calif., 143,500 b/cd; Odessa, Tex., 28,300 b/cd; Norco, La., 218,000 b/cd; and Wood River, Ill., 268,000 b/cd.

A sixth refinery at Deer Park, Tex., is not involved in the incorporation program. Rated at 222,200 b/cd, it is a joint venture of Mexico's Petroleos Mexicanos and Shell Oil Co., Shell Oil Products' parent.

Oil & Gas Journal's annual refining survey lists another Shell Oil Co. unit, Shell Chemical Co., as operator of the 35,000 b/cd Saint Rose, La., refinery, near Norco in the New Orleans area.

All told, Shell Oil Co. units operate seven U.S. refineries with combined crude capacity of 1,021,300 b/cd. Thus the parent company ranks No. 2 among U.S. refiners in terms of crude capacity, outranked only by Chevron USA Products Inc. with 1,049,000 b/cd (see table, OGJ, Dec. 18, 1995, p. 44).

Jim Morgan, president and chief executive officer of Shell Oil Products, said, "Significant progress has been made at our refineries to maximize financial performance, and this action is an important step for further improvement."

Shell's action closely followed a major move by another world class refiner, British Petroleum Co. plc, to improve efficiency and bolster profits. BP disclosed plans to sell or reduce capacity at three refineries-one in the U.S. and two in Europe (OGJ, Jan. 15, p. 32). BP earlier agreed to sell a refinery in Pennsylvania to Tosco Corp.