Oil drums containing lubricant oil sit on a conveyor belt as they are prepared for shipping at the Royal Dutch Shell Plc lubricants blending plant in Torzhok, Russia, on Tuesday, March 1, 2016. Royal Dutch Shell Plc has surpassed Chevron Corp. as the world's second-biggest non-state oil company after completing the acquisition of BG Group Plc. Photographer: Andrey Rudakov/Bloomberg
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Royal Dutch Shell and Saudi Aramco are unwinding their US refining and marketing joint venture as they pursue separate strategies for their operations. The deal will give the state-owned Saudi group full ownership of the largest refinery in North America.

The Motiva joint venture, which is owned 50/50 by the two companies and operates three refineries and a distribution and marketing business in the US, will be broken up and the assets distributed between them. 

There is also expected to be a cash payment from Saudi Aramco to Shell, although the size of that is being negotiated.

Shell has said it planned to raise $30bn from asset sales as it seeks to offset the cost of its £35bn acquisition of BG Group, which was completed last month.

Saudi Aramco will take full ownership of Motiva’s flagship refinery at Port Arthur on the Texas coast, potentially increasing the appeal of a spin-off of its downstream operations, which is one of the options it has been considering as it thinks about ways to bring in outside investors.

It will retain the Motiva name, and will also sell Shell-branded fuel in Texas and other parts of the southern and eastern US.

Shell will take control of the smaller two refineries, which are in Louisiana. It said that would mean they could be integrated more closely into the rest of its US downstream operations, allowing cost savings and other synergies.

John Abbott, Shell’s downstream director, said Motiva’s performance had been transformed in the past few years, but the Anglo-Dutch group now had a strategy of creating simpler and more highly integrated businesses to improve returns.

The Port Arthur refinery is the largest in North America, capable of processing more than 600,000 barrels per day following a $10bn upgrade to double its capacity that was completed in 2012. It was plagued by technical difficulties in the first two years after the expansion was completed, but since 2014 has generally had its full capacity available, according to the US government’s Energy Information Administration.

The expansion also increased the flexibility of the refinery, enabling it to process heavier crudes including bitumen from the oil sands of western Canada and heavy oil from Saudi Arabia.

However, President Barack Obama’s decision to block the proposed Keystone XL pipeline, which would have brought diluted bitumen from Canada into the US, will make it more difficult to increase Port Arthur’s use of Canadian crude.

The slump in crude prices has also caused delays to many projects in the oil sands, meaning that production growth will be slower than was expected two years ago.

Shell itself last year cancelled an oil sands project in Canada although construction had already begun.

Since the expansion, the Port Arthur refinery has processed only a very small amount of crude from Canada. 

For Saudi Arabia, however, the refinery has been a reliable customer, taking an average of 255,000 barrels per day of medium and heavy crude last year — about a quarter of total Saudi crude exports to the US

Its other principal sources of imports last year were Venezuela and Mexico.

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