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* Chevron solicits interest in Burnaby, British Columbia
refinery
* Shell seeks buyer for Martinez, California plant - sources
By Jessica Resnick-Ault
NEW YORK, June 17 (Reuters) - Global oil majors Chevron Corp (NYSE:CVX)
CVX.N and Royal Dutch Shell Plc RDSa.L are putting small
refineries on the auction block as they look to trim
lower-margin assets in the face of headwinds from rising crude
oil prices.
Chevron, the second largest U.S. oil company, is soliciting
interest in its Burnaby, British Columbia, refinery and gasoline
stations, the company told Reuters. Shell is looking for buyers
for its Martinez, California, refinery, two people familiar with
the situation told Reuters. Shell declined to comment.
These two companies, along with peers Exxon Mobil Corp (NYSE:XOM)
XOM.N and BP Plc BP.L , have sold more than a million barrels
per day of U.S. refining capacity in the past three years,
according to Stratas Advisors, a Houston-based consultancy.
The world's five largest oil majors together still have
enough U.S. capacity to refine about 4.7 million barrels per
day.
Refining profit margins have declined from highs seen in
2015, and the fear is that as crude prices recover from a
two-year rout, refiners will be squeezed as the cost of oil
rises but the price of gasoline does not keep pace. Selling the
plants while margins are still reasonably high allows the majors
to exit without a hit to their balance sheets.
Chevron also told Reuters it has retained Rothschild & Co to
market its 75 percent stake in a South Africa refinery. The
fifth oil major, Paris-based Total SA TOTF.PA , retained Lazard
to sell a 50 percent stake in its sole U.S. refinery, but was
unable to secure the price it desired, according to sources.
Refining has remained a profitable sector during a two-year
oil price rout, so these plants can fetch a relatively higher
price than exploration and production assets. Chevron and Shell
have the highest cash-flow deficits, said Lysle Brinker,
director of equity research at IHS Energy, and so have the most
motivation to sell.
The two companies have been investing in other areas of
their business - Shell plunked down $53 billion to buy BG Group
earlier this year, while Chevron has spent heavily on
large-scale liquefied natural gas projects.
"They're much more strapped for cash, and they're
accelerating the sale of assets that will get pretty decent
prices," said Brinker. "A lot of the asset sales that the big
guys have been selling are downstream and midstream, because
those have been sought-after by private equity and others
because there's more steady cash flow."
These assets may prove to be a better fit for smaller buyers
that focus on particular regions, such as the North American
West Coast, or companies that concentrate on global storage and
trading, but not oil production.
SMALLER ASSETS ON BLOCK
While the majors plan to continue to operate large,
profitable refineries that are well integrated with their oil
production assets, refineries outside of that footprint are
likely to be sold, Brinker said.
Chevron's downstream strategy has focused on running large
scale refineries that can serve markets in the United States and
Asia and on operating petrochemical plants that produce very
profitable products.
The refinery in British Columbia, however, refines light
oil, rather than heavy crude from Canada's oil sands, and its
products are distributed in a smaller region around British
Columbia and down through Washington state.
Selling smaller assets like that is likely something most
companies are looking at - or should be - said Mark Routt,
chief economist for the Americas with KBC Advanced Technologies
in Houston.
"Far better to sell it when it's good times than bad times,"
Routt said. "It's not as good as it was in '15, but it's still
good times."
Chevron in April agreed to sell its 54,000 barrel-per-day
Kapolei, Hawaii, refinery to a group backed by private equity,
and Shell agreed in March to exit its Motiva Enterprises joint
venture with Saudi Aramco. Shell is shedding a plant in Texas as
a result of the dissolution of that venture.
Chevron previously said it would sell its 75 percent stake
in its South African unit, which includes a refinery in Cape
Town.