Exclusive: Carlyle Group in talks with Sunoco for Philly refinery: source

NEW YORK Tue Apr 17, 2012 5:34pm EDT

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NEW YORK (Reuters) - Private equity firm Carlyle Group LP is in talks with Sunoco Inc SUN.N to buy its 335,000 barrel per day refinery in Philadelphia, a person with direct knowledge of the matter said on Tuesday.

Oil markets are closely watching to see if Sunoco finds a buyer for the plant, one of three refineries on the U.S. East Coast that has been threatened with closure due to weak profits.

The loss of the Philadelphia plant - the largest of the three - could cause a shortfall in refined products in the region and drive up gasoline prices during the summer driving season unless a buyer is found by the July 1 deadline set by Sunoco.

The deal between Carlyle and Sunoco presented challenges because the facility was losing money and so all options, including regulatory issues, needed to be explored in order for the asset to be made viable, the source said. There is no certainty a deal will be reached, it added.

Carlyle declined to comment while a spokesman for Sunoco was not immediately available for comment.

Another source familiar with the talks said Carlyle was an early bidder on the Philadelphia plant but had stepped out of the ring before returning earlier this year.

Sunoco put the plant up for sale late in 2011. It is one of three in a 12-mile radius near Philadelphia slated for sale or closure.

Sunoco is looking to exit the refining business where it has been losing money, the company said.

It shuttered its 178,000 barrel per day refinery in Marcus Hook in 2011 and is looking at options for the site, including turning it into a terminal for gasoline and diesel for Sunoco Logistics (SXL.N), its pipeline and terminal arm.

In late September, ConocoPhillips (COP.N) idled its 185,000 bpd Trainer refinery, about a mile away from Marcus Hook. Sources say Delta Air Lines has bid on that plant and a sales announcement could come as early as this week.

Most Northeastern refineries are designed to run only light, sweet crude oil imported from Europe and Africa. That oil now is priced at a steep premium to other crude oils, a situation that has cut profit margins.

Preferred Sands LLC, a unit of a privately owned Pennsylvania-based investment firm, is also in the running as a possible buyer of the Philadelphia refinery.

Preferred Sands, based in nearby Radnor, is a supplier of sand and proppant to the hydraulic fracturing industry, and also operates a fleet of more than 1,500 rail cars with connections to major railroads.

Also bidding is United Refining, which owns and operates a small refinery in Warren, Pennsylvania.

"We are looking at it. We are not committed either way," said John Catsimatidis, head of United Refining.

A source familiar with the bid said that United was only interested in the Girard Point section of the plant. The plant comb two refineries and also has a Point Breeze section.

(Reporting By Janet McGurty and Greg Roumeliotis in New York; Additional reporting by Mathew Robinson; Editing by David Gregorio)

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