Here is update on Valero looking to sell another of its Refineries – Paulsboro. Both Delaware plants have been looked at even prior to June 2008 as potential Valero sale and were first 2 plants with cokers to be put on Valero’s sales list.
Valero has had most of its refineries on the block at one time or another but always walks away without a sale because it is unwilling to sell at the type of prices it purchased it assets for ~ $0.10-$).60/$1.0 value. The package deal it offered for Delaware with Paulsboro would never have worked given all problems and bad feelings that goes along with the past Delaware (Motiva) fluid coker & GE (Texaco) Gasification failures/fines/ect.
The analysts estimates of $600-800 MM for Paulsboro are wishful thinking in todays economy & refinery margins even though this would be a current value of $0.18-25% (double that for lower 2000-2005 refinery/coker cycle for additions) for replacement or Grassroots cost. But refineries are worse that used cars and this refinery started up in 1917 (83 years old) even though no units or structures from that era remain (similar to most US +60-100 year old refineries), so that means the $600-800 MM sales tag is closer to a $0.60-$0.75 per $1.0 market value and it needs to be half of that along lines of Paulsboro’s own purchase value from Mobil in 1998.
There are strategic interest in this refinery given the low number of US East Coast refineries and fact that it can also make about 12MBD Lubes and 16 MBPD of asphalt marketed to local roofing & paving contractors which provides alternate for feedstock to its 27 MBD coking unit. Also since Paulsboro has physical access to NY Harbor it has distinct advantage for Jet Fuel, Diesel & other products on hedging its paper barrels (ie – always option on Merc to deliver physical BBLs for Paper hedges) since it is only 15 miles from NY Harbor by Delaware River.
I believe the analyses is way off on crude capacity at 160 MBD (probably using OGJ WW Survey’s 166 MBD capacity for Paulsboro) and it should be closer to 185-195 MBD it was in ~2004 listings & prior to Valero purchase (unless there has been some serious de-rating of capacity due emissions). There were 4 new grass roots process units added at Paulsboro in 1980’s and proir to Valero it was carried at 195 MBD. Valero modernized & improved 11 other units to bring plant to its current capacity of 185 MBD.
Regards
