Tesoro eyes West Coast empire with BP refinery deal

Mon Aug 13, 2012 12:56pm EDT
 
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By Selam Gebrekidan and Michael Erman

(Reuters) - Tesoro Corp TSO.N moved on Monday to create the biggest U.S. refining empire in the Pacific Basin with a $2.5 billion deal to buy BP's (BP.L: Quote) Carson plant in the isolated California market.

Shares in Tesoro shot up more than 9 percent, trading at $38.75.

If regulators approve the purchase, the independent refiner will have three plants in California alone as well as three refineries elsewhere in the Pacific region -- in Washington, Alaska, and Hawaii.

The Texas-based company plans to merge the 266,000-barrels-per-day Carson plant with its 97,000-bpd Wilmington plant, located next door, to form a 370,000-bpd refinery, company officials said. It would be the largest refinery west of Texas.

"Integrating the BP assets, specifically the logistics, is expected to drive significant value throughout our West Coast system," said Gregory Goff, Tesoro president and chief executive officer.

The deal would give Tesoro nearly 700,000 bpd of refining capacity in the Pacific Basin, putting it ahead of Chevron Corp (CVX.N: Quote), which has 575,000 bpd of capacity as the top U.S. refiner in the region.

Tesoro is also buying storage and distribution assets from BP, including more than 100 miles of pipeline, three marine terminals, four land storage terminals and four product marketing terminals.

It plans to sell those assets to its master limited partnership, Tesoro Logistics LP (TLLP.N: Quote), for around $1 billion within a year of closing.   Continued...

 
BP's logo is seen on one of its corporate sponsor pavilions in the Olympic park, in Stratfod, east London, July 19, 2012. REUTERS/Andrew Winning