Shell to become biggest US petrol retailer in $3.8bn Texaco deal

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The Independent Online

Shell yesterday became the biggest petrol retailer in the United States after signing a $3.8bn deal to buy out Texaco's minority interests in two joint venture oil-refining and marketing operations.

The deal will increase Shell's share of the US petrol market to about 15 per cent, enabling it to leapfrog Exxon-Mobil and BP, which both have shares of about 12 per cent. Once the deal is complete, Shell will have 22,000 forecourts in the US.

Paul Skinner, chief executive of Shell's oil products division and a managing director of the Anglo-Dutch oil giant, forecast that the acquisition would double Shell's US downstream profits to around $1bn a year by 2004.

Mr Skinner said: "The US is the world's largest oil products market and this transaction reinforces our confidence in the US economy."

The deal also enables Texaco to complete its merger with its bigger US rival, Chevron. Had the sale not been agreed then the merger would have faced regulatory obstacles, forcing Texaco to place the assets in trust.

Under the agreement, Shell will acquire Texaco's 44 per cent stake in the joint venture Equilon, giving it 100 per cent control. In a related deal, Shell and the state-owned Saudi Refining are also buying Texaco's stake in another joint venture, Motiva Enterprises, which they will then own 50:50.

Shell said the two transactions would cost $2.1bn in cash. Shell and Saudi Refining, which retails petrol under the Aramco brand, are also assuming $1.4bn of debt and $300m of pension liabilities. However, Shell declined to spell out how the costs of the deal were being split between it and the Saudis.

Along with Texaco's petrol stations, Shell will also acquire control of eight oil refineries, four of them on the West Coast. The two acquisitions will result in 1,250 job losses at a one-off cost of $100m, but Mr Skinner said cost savings would reach $400m. It will cost a further $500m to rebrand the Texaco petrol stations over the next three years.

Equilon operates primarily in western US states and has 4,500 Shell-branded and 4,500 Texaco-branded stations as well as four refineries and a lubricants business. Motiva is based in the eastern states and has 8,200 Texaco-branded stations against 4,800 operating under the Shell name. It also owns four oil refineries.