British Petroleum Co. plc and Mobil Corp. last week disclosed a plan to combine their European refining and marketing operations in a bid to reduce operating costs.
The megaventure will have $5 billion in assets-$3.4 billion from BP and $1.6 billion from Mobil-sales of more than $20 billion/year, and a market share on a par with those of Royal Dutch/Shell and Exxon Corp.
It will operate in 43 countries, including the 15 European Union nations, Switzerland, Turkey, Cyprus, all of eastern Europe, and Russia west of the Urals.
BP said the combine will hold about 12% of Europe's retail products market and should not fall foul of European Commission antimonopoly rules because of the similar positions of Shell and Exxon.
BP and Mobil hope to gain EC approval for the venture this year, with a view to having combined operations up and running early in 1998.
In a joint statement, BP Chief Executive John Browne and Mobil Chairman and Chief Executive Officer Lucio A. Noto said, "The European downstream operations of our two companies are uniquely complementary.
"Bringing them together will produce efficiencies through sharing costs, eliminating duplication, and achieving major economies of scale. It will provide us a distinctive asset base that offers a superior range of products and services and will have strong potential for growth."
BP said the companies will book an initial cost of about $400 million in setting up the venture and expect to see combined pretax cost savings of $400-500 million/year within 3 years.
The details
BP's contribution to the venture will be interests in eight refineries with a net 760,000 b/d throughput capacity and 5,600 service stations holding an 8% share in the European fuel and lubricants markets.
Mobil's contribution will be interests in six refineries with a net capacity of 350,000 b/d, and 3,300 service stations holding a 4% share of the fuels markets and 10% in lubricants.
The venture's businesses will be operated under two partnerships: a refining and fuels unit with BP as operator and 70% partner and Mobil owning 30% and a lubricants unit operated and owned 51% by Mobil with BP holding 49%.
Mobil's refining and marketing staff will transfer to BP, and BP's lubricants staff will move to Mobil. The companies plan to lay off 2,000-3,000 of a total 17,500 nonservice station staff. Other layoffs will occur as duplications in the venture's assets are removed.
No refineries have been marked for closure so far, but both companies will continue with existing plans to trim refining capacity.
BP early this year disclosed a plan to close or reduce capacity at three refineries worldwide, including closure of the 200,000 b/d Lavera plant in France and a reduction in capacity of 70,000 b/d at its Nerefco joint operation in Rotterdam (OGJ, Jan. 15, p. 32). Mobil last year closed its Woerth refinery in Germany.
All service stations will convert to BP's green livery and will carry the BP logo and perhaps a small Mobil logo, as well as a joint venture symbol that has yet to be designed. BP said there may be closures or sales of stations where BP and Mobil have competing sites close together, "but if there is enough business we will keep them both open."
Although lubricants will be handled by Mobil, base oil plants will be operated by BP under the refinery and fuels partnership. The companies have some lubricants blending plants sited close together. Some will be closed, but their fate will be decided case by case.
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