Oil and Gas

Conoco, Petrobras eye Aruba refinery buy - sources

HOUSTON, Nov 13 (Reuters) - U.S. energy giant ConocoPhillips COP.N and Brazil's national oil company Petrobras PETR4.SAPBR.N are early contenders for Valero Energy Corp's VLO.N 275,000 barrel per day refinery in Aruba, according to sources familiar with the matter.

Delegations from Conoco and Petrobras have visited the refinery, even though Valero said only last week that it was exploring strategic alternatives for the plant.

Representatives of a private investment group also have toured the refinery, which is expected to have a pricetag of $10,000 to $15,000 per barrel of daily production, or $2.75 billion to $4.13 billion.

A Conoco spokesman declined to comment and representatives of Petrobras did not reply to messages.

Valero spokesman Bill Day said the company would not discuss specific companies that may be interested in the refinery, which Valero bought in 2004 for $465 million from El Paso Corp EP.N.

The Aruba refinery may not necessarily be sold, Day said, as the company would consider a joint venture.

Other companies thought to be interested in the Aruba refinery are Alon USA Energy Inc ALJ.N, Citgo Petroleum Corp, Delek U.S. Holdings Inc DK.N, Lukoil LKOH.MM and Tesoro Corp TSO.N .

Representatives for Alon, Citgo, Delek and Tesoro declined to discuss what interest their companies may have in the Aruba refinery, which cannot make finished products for the U.S. market.

Lukoil did not reply to requests for comment.

Alon spokesman Joseph Israel did say the company was looking for refineries to acquire as it pursues a growth strategy.

One source said the Aruba refinery’s need for heavy investment might scare off potential buyers and keep the pricetag closer to $10,000 per barrel.

“What you buy, if you pay that, is the right to spend billions more,” the source said.

If the Aruba refinery would not fit into a buyer’s system of refineries as a supplier of intermediate feedstocks, a further investment possibly as high as the purchase price could be required, sources said.

Valero cited the refinery’s need for heavy investment to become competitive when it said it would hiring UBS Investment Bank to advise on strategic options.

The Aruba refinery is one of several that San Antonio-based Valero hopes to unload while refinery pricetags are at record levels, the sources said.

As the price the company paid for the Aruba plant -- and what it could potentially gain -- demonstrate, refineries have become high-ticket items.

“It shows that it’s working, when you can take a refinery you paid millions for and sell it for billions,” a source said.

Valero also is looking to sell its 90,000 bpd refinery in Ardmore, Oklahoma, 170,000 bpd McKee refinery in Sunray, Texas, and an 85,000 bpd plant in Krotz Springs, Louisiana, the sources said, because the plants are land-locked.

Valero may also be looking at selling its 195,000 bpd refineries in Memphis, Tennessee, and Paulsboro, New Jersey, the sources said.

Some of the refineries Valero wants to sell are also limited in the feedstocks they can process.

Day declined to discuss what refineries Valero may consider selling, but said the company was committed to concentrating its investments in plants that offer a wide range of opportunities. (Editing by Walter Bagley)