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Valero Ponders Paulsboro Sale

Valero Energy is considering selling its Paulsboro, N.J., refinery. Acquired by Valero from Mobil in 1998, it includes one of the only API Group I base oil plants remaining on the U.S. East Coast.

The Paulsboro refinery has a base oil plant with 11,000 barrels per day of API Group I capacity and 500 b/d of Group II capacity. The other remaining East Coast Group I plant is American Refining Group’s 2,100 b/d plant at its Bradford, Pa. refinery.

Valero spokesman Bill Day said the company would explore “strategic alternatives” for the Paulsboro refinery, with a sale being one option. “We have started a process that includes hiring an investment bank to help us assess potential interest in the plant and gather bids,” Day told Lube Report on Monday. “But it doesn’t necessarily mean we have decided to sell the plant, just that we are keeping our options open.”

He explained that Valero is in the process of streamlining its operations and getting down to a core group of assets. “A refinery like Paulsboro may hold more value to some other company than it does to Valero, and we will explore whether we can unlock that value,” Day noted.

“We think it’s a viable refinery that can be sold as-is instead of a shut-down operation like Delaware City was,” Executive Vice President-Corporate Development and Strategic Planning Gene Edwards said during a Jan. 27 conference call with analysts. “We’ve got some interested parties, so we’ll just have to see how it plays out.”

Valero acquired the Delaware City, Del. fuels refinery along with three others from Premcor in 2005. It found that the Delaware operation could support base oil production at Paulsboro if the two locations, about 35 miles apart, shared crude shipping and terminaling arrangements.

In early and mid-2006, Valero had wavered on keeping Paulsboro’s lube unit open, but the Delaware City deal cemented its resolve. Citing increased flexibility in crude supply, it said the base oil operation would continue.

In November 2009, Valero announced that economic conditions and weak demand prompted it to permanently close Delaware City. A company official at the time said it would not affect base oil operations in nearby Paulsboro. Although the two refineries were once yoked to the same crude supply chain, changes had unlinked Paulsboro’s operations from those of its sister refinery, so it could stand on its own.

Reached yesterday, Terrence Hoffman, director of base and process oil sales for Valero Marketing and Supply in San Antonio, declined to comment.


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