BP to sell Texas City refinery, resume dividend

BP said it will cut its U.S. refining capacity in half by selling its troubled Texas City refinery and another near Los Angeles as part of a new strategy.

The Texas City refinery, the third largest in the country with a capacity of 475,000 barrel per day, became part of BP with the 1998 merger with Amoco.

It was the site of a deadly blast in 2005 that killed 15 and injured more than 100. A handful of workers also have been killed or injured in accidents there in recent years. The company has spent more than $1 billion modernizing the facility, which employs as many as 4,000 workers.

The announcement came as part of BP’s fourth quarter earnings report. The oil giant said it had net income of $5.5 billion, or $1.47 per share, which was below analysts’ expectations.

For all of 2010 the company reported a loss of $3.7 billion, due largely to a $40.9 billion charge for the Gulf of Mexico oil spill, which was increased by $1 billion from prior estimates. That’s the company’s first loss since 1992.

The company also said it would resume paying a dividend of 7 cents per share, half the level it was before it stopped paying the dividend after the spill.

“2010 will rightly be remembered for the tragic accident and oil spill in the Gulf of Mexico and it is clear that as a result BP is a company in transition,” BP group CEO Bob Dudley said in a statement. “2011 will be a year of recovery and consolidation as we implement the changes we have identified to reduce operational risk and meet our commitments arising from the spill.”

BP’s clean replacement cost of supplies, a closely-watched metric that takes out gains or losses from inventories and other non-operating items, was $4.36 billion for the quarter. It’s a slight improvement from the same quarter of 2009, but below expectations due to energy trading losses and a higher effective tax rate.

The Texas City divestment is based on the refiner not being well integrated with BP’s overall marketing business, said BP’s head of refining and marketing, Iain Conn in a morning conference call.

The facility does not have as much storage capacity as BP would like and to do so would require a significant physical expansion.

Texas City continues to improve its profitability, however, Conn said, adding $2.5 billion in annual profits over the past three years.

“We have a number of inquiries from competent operators,” Conn said.

45 Comments

  1. Joaquin

    The Texas City Refinery had been a problem for years when Amoco owned it. BP could have saved itself a lot of trouble by making the purchase of Amoco without it.

    I predict that BP will have trouble selling this refinery despite the profit it makes. The trouble history will make it a tough sell not to mention the environmental issues that surround refineries to begin with.

    If the permitting process weren’t so expensive and time consuming, 10 years, it may be easier to just close the site and build equal or additional capacity elsewhere.

    #1
  2. dr

    well, I hope all of environmental nutjobs are happy! It was jus a matter of time before BP said they have had enough. Texas City was on the verge of making a comeback but now it will go back to being the blighted area it has always been.

    #2
  3. 6underground

    OH NO!!! Loren Steffy won’t have a job if BP sells… What will he have to write about???

    #3
  4. The Law suits caused BP to look for another home….I remember TC from the thirties to 1981 the year I retired early,moved north.Good luck BP.

    #4
  5. Slim Chance

    Slick Rick will have to order the reports on groundwater to be burned. The future liability for ground water will be a real issue on the price. BP will probably have to pay a small fortune to get rid of the problem.

    #5
  6. Keith

    With the EPA stepping up standards for emissions most of the Gulf Coast refineries will be sold or closed down. They will be built in countries that do not have as stringent emission standards and lower taxes. That sucking sound is jobs leaving this country. Thanks Obama, Bill White and all the other democrats that are taxing and regulating jobs out of this country.

    #6
  7. dr

    They will have no problem in selling the refinery. It is grandfathered in on the rules because it is so old. It will probably be sold to a foreign national company. If you don’t like BP’s style then you will really like it if China, Russia, or India buy it out.

    #7
  8. Lamer

    “well, I hope all of environmental nutjobs are happy! It was jus a matter of time before BP said they have had enough. Texas City was on the verge of making a comeback but now it will go back to being the blighted area it has always been”

    Ignorance is bliss isn’t it? I’m pretty sure the ‘headaches’ are coming from the many people that have been killed, maimed, or sickened by repeat explosions,leaks and other mishaps at the refinery caused by a negligant company.

    #8
  9. Donaldd

    Too bad BP Couldn’t be charged with Negligent Homicide.

    That’s the way some companies Run Refineries ignore safety violations, take as much profit as possible and Sell out.

    #9
  10. Adios hombre!

    #10
  11. Kinglyam

    @Keith – No refineries are going to shut down. The cost of complying with environmental regulations is minuscule compared to the cost of expanding or building a new refinery elsewhere. The only reason companies resist is because the fines are generally even cheaper than installing new equipment. It’s the cost of doing business for them.

    @dr – Unless the potential buyer does a piss-poor job of researching, they’re going to find out that the environmental liabilities at that site probably outweigh the value. The liabilities there would probably make the facility worthless under Sarbanes-Oxley. However, you’re right about foreign buyers not giving a damn. Go look at the reports about Shintech in Freeport from last week, a Japanese-owned plant that is reported to have discharged 10-11 tons of PVC into the Brazos river at the order of the managers.

    #11
  12. MiCHaeL

    Grüße Fräulein, Sturm-Verbot-Führer, it admits like goodbye with it indicated

    #12
  13. Sean

    and with that, Texas City, the bell tolls for thee…

    BP leaving town will likely kill what’s left of the abyssmal job market here to begin with. This town’s already hit harder times than ever just by the influx of gold-toothed criminals we got when Ike drove them out of Galveston, now with BP leaving it’s only going to get worse. The really sad thing is we don’t have enough cops to handle the crime as it is. How are they going to handle it when the poverty level gets even worse as refinery workers leave town for jobs elsewhere? Might as well close the town.

    #13
  14. Sean

    and NO it’s not a “Democrats did this to us” woe is me thing. This has nothing to do with the idiots of either political party. This has to do with multiple injuries, deaths, and leaks from a company that cared more about the bottom line than about safety (which, if you REALLY want to split political hairs, is more of a Republican trait in the first place). Plain and simple BP bought the plant from Amoco, who ran it poorly, and, rather than improving the site, continued on in the same manner that Amoco had. Hopefully the new buyer (if they can find one) will actually put some money into renovating the place, but I doubt it.

    #14
  15. traintrack

    the grandfather part is usually only good as long as the company that owned it at the time keeps it.when there is a sale it usually has to up grade. Is that not correct Nazi Steffy ????????

    #15
  16. Ben

    As usual the Faux News “base” types blame it all on democrats but its the republicans who don’t want to pay any wages to workers and have sent all the jobs overseas strictly for more profit. Overseas they can pollute at will and pay low wages with no health or safety standards. Faux News just spinning lies and distortions 24/7 to the sheep

    #16
  17. Keith

    Kinglyam:
    You are mistaken. Exxon closed a refinery in Billings, Montana around 1995. The state passed an emissions law that was more stringent than the EPA. At a hearing of the Montana legislature an Exxon rep said they would close the refinery and build it in another state if the law and penalty levels were passed. The law passed and the refinery was shut-down. The local newspaper was all for the new law and the same newspaper was stunned when the plant shut down. The hit to the local economy was over 30 million per year (small refinery).

    Exxon is currently building a new refinery in the middle east. When the new refinery is finished it will be considerably larger than the one in Baytown. Because of the cost to upgrade the existing facility to meet every increasing EPA standards, I fully expect the Baytown refinery to be shut down in the next 20 years.

    These are just a few examples. Exxon can find a buy. A new buyer can operate for a while, then declare bankruptcy and walk away.

    #17
  18. ntangle

    Keith wrote: Exxon closed a refinery in Billings, Montana around 1995.
    ———————
    What size was it? They still operates a 60MPBD refinery in Billings.

    #18
  19. Godiva55

    (which, if you REALLY want to split political hairs, is more of a Republican trait in the first place).
    +++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
    Aw, and you were doing so well.
    But now you’ve gone and shown yourself to be a liberal fruit loop.
    So, yeah, let’s split political hairs.
    Do you have any facts to back up your ridiculous claim?
    Probably not, but if so, do share them with us.

    #19
  20. Godiva55

    We’ve got our health!

    Who needs jobs???

    #20
  21. Republican Man

    Tony Buzbee ran BP out of Galveston County.

    #21
  22. If I were BP I’d do the same thing.

    #22
  23. Just Me Again

    >> “We have a number of inquiries from competent operators,” Conn said. <<

    Competent, excellent! That will be a big step up from the current ownership.

    #23
  24. pdh42

    I sure hope that all of the ones who are suing BP are enjoying the lose of jobs that they are creating…. I can not say what I think of Buzbee and his ilk but one day they will realize the damage that they have done to many people….

    #24
  25. Dollar

    If they are not closing domestic refiners, they surely have to be thinking about it. It makes a lot of sense to build in countries where they welcome the jobs and don’t have the environmental restrictions.

    I know the Saudis have built a huge 900,000 bpd refinery, they think they can make more money exporting the refined product.

    India has also built a huge 800,000 bpd refinery that can process the Sauds heavy oil.

    And those pushing the greenhouse gas agenda accomplish nothing but see US jobs leave the country.

    Frankly, I wonder why the US international vertically integrated oils, stay in the USA. Why not just move offshore and be done with the hassle ??

    #25
  26. FormerTC

    I agree with Sean. All my family is still there in TC and my brother works for BP. It’s going to kill the economy even further. And that’s an already dismal outlook for that area as there is nothing in Galveston and the crime rate has gone up…BP will most likely sell to the first offer they get just to dump the TC plant. The tragic past of the plant won’t make it hard to sell is the price is right. Oh the good ole days when it was Carbide and Amoco……

    #26
  27. hgnis

    My money is on Valero and Hess for this one…

    #27
  28. fubuzbee

    Sad thing here are all of the dedicated hard working people commited to make the refinery a safer place who showed up today for work, not knowing what the day had in store. They found out the same way you did. Chron.com, and Click2houston. Way to go BP.

    #28
  29. Kinglyam

    @Keith – Not sure where you’re getting your information, but I’m afraid you’re the one who is mistaken. As ntangle reports, the refinery is still there.

    Some old, small to mid-size refineries have shut down due to economic conditions during the recession, like a couple in New Jersey (145k barrels each) and a tiny one in Aruba. For these guys, the economies of scale just don’t work as well, and maybe in those cases it’s true that very strict environmental laws can be a PART of the problem. But that’s not the only thing. Upgrading or replacing aging equipment, worker pensions, and dropping margins due to outside competition make these marginal refineries less interested in staying open.

    However, the monster facilities like Texas City or EM Baytown aren’t going anywhere. And easing up on protecting our community health and the safety of workers is not worth trying to keep the marginal refiners in place. It’s easy to say loosen the restrictions if you aren’t one of the people paying with your health. I personally don’t want the people who live in Texas City to run a higher risk of cancer just so I can pay a penny less at the pumps.

    #29
  30. roberta

    As bad as BP is, they bought an albatross when they took over the old, antiquated Amoco refinery and its worker culture that cared nothing about safety or the environment. Perhaps if they had fired every single worker and started over with new ones they could have done better, but that plant has always been a disaster waiting to happen. I’m with the other folks here who predict it will be difficult for BP to sell this pile of junk–it may be profitable but nobody wants the continued liability of such a bad plant.

    #30
  31. PT

    Hey, DR, you’re criticizing foreign companies–isn’t BP foreign? Last time I looked, the USA separated from Britain more than 200 years ago.

    #31
  32. RTY

    My money is on Relliance (India) on this one.

    #32
  33. pmshop

    Southern California refineries too? Like I said…they are hell bent on sponsoring the Sydney Olympics

    #33
  34. RTL

    Kinglyam…”tiny one in Aruba.”

    The Aruba Refinery is by no measure tiny. It can easily process 200bpd of pretty heavy crude. It just can’t make US spec product. Valero at one-time had plans to take it to 500 bpd, before closing it. It is now re-open and running at reduced rates.

    #34
  35. theblackpearl

    Amoco’s last CEO H.Larry Fuller and disgraced BP CEO John Brown should get together to write, “How to Destroy an International Oil Company”. I would be a NYT best seller for sure. Fuller single-handedly destroyed Amoco, the most respected gasoline brand in the US, in only 7 years. Brown not only disgraced himself by perjury, but destroyed the Amoco and ARCO brands in only 5 years. Quite a track record for a best seller.

    #35
  36. Anthony

    I’m sure in some way or another, this will cause the price of oil and ultimately the ridiculous price of gas. Fun times.

    #36
  37. BigAltx

    I totally agree on the BP Amoco Merger outcome. The Amoco way was based on disregard for safety, leadership by consensus and bloated management with a lack of efficiency at absolutely every level.
    Well, what we are seeing now is the beginning of a downward spiral and an upward spiral.
    The down pressure is the economic viability of the Refining and Marketing processes here in the US. The upward spiral is the cost of these refined products like: Gasoline, Diesel, Kerosene (Jet Fuel), etc. as the US will be net importers instead of exporters of the same products in the future.

    The current administration’s witch hunts against the oil and gas industry is driving the companies to either sell or shutter existing refining assets since they either can not run them given the old technology and capital investment required to upgrade to Low Sulfur (hydrocracking) fuel refining, or they see the current unfavorable environment in running the refineries (see recent EPA actions and Cap and Trade debate) and are taking a business decision to get out. The bulk of the world’s new refining capacity is in the middle east and asia. The actions of this administration are directly resulting in the exportation of jobs overseas. Not to mention, when the inevitable accident occurs I would rather have a company like BP on the line then some small company which will end up in Chapter 7 and a public bill for the cleanup costs.

    When we are paying $6.00 a gallon for gasoline (within the next 18 months) you can thank the current administrations lack of sophistication (at best) in handling the big picture of the US ECONOMY. Sounds like Larry Fuller should help Obama write a book – How to destroy a country in 48 months.

    #37
  38. pdh42

    roberta you said “As bad as BP is, they bought an albatross when they took over the old, antiquated Amoco refinery and its worker culture that cared nothing about safety or the environment. Perhaps if they had fired every single worker and started over with new ones they could have done better, but that plant has always been a disaster waiting to happen. I’m with the other folks here who predict it will be difficult for BP to sell this pile of junk–it may be profitable but nobody wants the continued liability of such a bad plant.
    =====================
    You for one do not know anything about any of the people who work at that refinery….Since there has not been a new refinery built in this country since 1973 I would think that most of them fall into your ignorant statement about old antiquated refinery…. You say they should have fired every worker???? Why would you want everyone to lose their jobs???? Were you fired from there or maybe told that you were not qualified to work there???? Before you continue to shoot off your mouth and show how ignorant you are of this issue you might want to do a wee bit of studying up so that you might have something to say that might have a shred of truth in it…. BTW, I am not vindictive like you and I do not hope that you lose your job if you even have one….

    #38
  39. Tom Fowler

    Big Altx
    Just for argument’s sake, I’m pretty sure Texas City and most of our Gulf Coast refineries are pretty sophisticated, i.e. can handle all sorts of high sulfur crude or just about anything thrown at them. I took a tour of Exxon Baytown where an engineer told me they get giddy over taking absolute awful stuff no one else can handle and turning it fuel.

    We’ve also had surplus refining capacity for years. Yes, new refineries are opening overseas but it’s not like they’re shipping gasoline to us. The rest of the world is finally becoming car-happy.

    If we hit $6 gasoline I don’t think it will be because of a lack of domestic refining capacity but because of the price of oil. Would a continued freeze of Gulf of Mexico drilling lead to a rise in oil prices? Indeed.

    #39
  40. Edward Bourgeois

    I worked in the Texas City Refinery as a contract Inspector in 2001. I told myself then that was the last time I’d work there. I wasn’t comfortable with their reactions to our inspection reports / recommendations.

    I went back to work there as a contractor in June 2005. A couple of months after the ISOM tragedy. I’ve never left. Hired on with the company a year later. BP has put more money into this refinery than any other I’ve worked in, instituting more and safer process controls, preventative maintenance, and inspection procedures. We don’t have any more blow down stacks. When we find a deficient piece of equipment, it’s addressed immediately.

    The Texas City Refinery isn’t going anywhere. If anything, we’ll be more profitable after we’re not tied down by BP’s crude supply and product sale chains. We’ll be the most profitable, safest, and most compliant merchant refinery on the Gulf Coast. You just wait and see.

    #40
  41. shawnee

    I think it is unlikely that an American company wants to buy that refinery and absorb its environmental, safety and social-justice woes.

    It will probably be purchased by a foreign, state-owned firm from the Middle East or China that doesn’t care about any such concerns.

    #41
  42. Mike

    Not surprised. BP is getting their butts sued off. I work for BP refinery and its a crap hole they almost blow up everyday.

    #42
  43. Socalal

    I wouldn’t worry too much folks. I retired after 38 years in the Oil Industry. One refinery I worked at changed names/owners seven times in the twelve years that I worked for them. It didn’t affect my paycheck one iota!

    #43
  44. pdh42

    Mike
    February 2, 2011, 9:14 AM
    Not surprised. BP is getting their butts sued off. I work for BP refinery and its a crap hole they almost blow up everyday.
    =======================
    I for one don’t believe you as we do NOT almost blow up this refinery everyday….

    #44
  45. RAP

    The BP Texas City plant is no different that any of the rest. Things can happen in refinery’s and do happen, and yes even at EXXON.
    I have worked in refinery’s all my life and Texas City is in better shape than most of the other gulf coast plants. They workers are highly educated and take their jobs very seriously. BP makes repairs and keeps equipment in top condition. They know how to take good care of all their employees also. All you outside people have no idea at all.
    Its a shame the bulls eye has been on the plant so long that BP has to back out.
    Some other company that wants to have a world class operation will buy the plant and Texas City will be just fine. I hope they treat their employees as well as BP has.

    #45