(Recasts, adds quotes, details about company relationship, divisive issues, previous NEW YORK)
By Kristen Hays and Erwin Seba
HOUSTON, March 16 (Reuters) - Royal Dutch Shell and Saudi Aramco announced plans on Wednesday to break up Motiva Enterprises LLC in a deal that ends a partnership of nearly two decades and hands control of the biggest U.S. refinery to the Saudi state oil giant.
News that the two energy companies will divide assets in their oil refining and marketing joint venture had been expected by many as they navigated an often-frayed relationship where their respective interests sometimes diverged.
An early sign of a pending breakup emerged last summer when Motiva announced plans to set up its own oil products trading operation separate from Shell. The desk started up in January.
The divorce also comes as the Saudi government considers selling shares in the world’s largest oil firm.
Abdulrahman Al-Wuhaib, senior vice president of downstream at Saudi Aramco, said in a statement on Wednesday that the joint venture formed in 1998 served the partners’ downstream business objectives “very well for many years.”
“It is now time for the partners to pursue their independent downstream goals,” he said.
A U.S. spokesman for The Hague-based Royal Dutch Shell said the breakup and split of Motiva’s assets were consistent with Shell’s plans to simplify its global portfolio.
Motiva’s three refineries in the U.S. Gulf Coast region have a combined capacity of over 1.1 million barrels per day, located within a 120-mile (195-km) radius of one another. The marketing operations support a network of about 8,300 Shell-branded gasoline stations in the Eastern and Southern United States.
The partners said that under the terms of a non-binding letter of intent, Aramco would take over the Port Arthur, Texas, refinery and retain 26 distribution terminals as well as the Motiva name.
It will also have an exclusive license to use the Shell brand for gasoline and diesel sales in Texas, the majority of the Mississippi Valley, the Southeast and Mid-Atlantic markets, it said.
Shell will solely own the Louisiana refineries in Convent and Norco, where it also operates a chemicals plant, as well as Shell-branded gasoline stations in Florida, Louisiana and the Northeastern region.
A Shell spokesman said the company would move forward with Motiva’s plan to integrate the Louisiana refineries to operate as a single 500,000-bpd plant.
While sources close to the situation say the relationship between Shell and Aramco has been troubled, that tension grew after an ambitious $10 billion expansion of Motiva’s flagship Port Arthur refinery. The project doubled its size to 603,000 barrels a day and surpassed Exxon Mobil Corp’s Baytown, Texas, plant as the country’s largest.
A disastrous leak of caustic fluid in a new unit crippled the plant shortly after top executives from Shell and Aramco unveiled the expansion in May 2012, upping the cost that already had ballooned from $5 billion.
“That was a continuation of the bad blood,” said a person familiar with the relationship.
In February 2014, Motiva hired Dan Romasko, who had been the top operations executive at refiner Tesoro Corp, to replace former top Shell trading executive Bob Pease as chief executive.
Romasko told Reuters in an interview a year ago that Motiva was “coming into its own” after the company announced plans to integrate the two Louisiana refineries.
Sources familiar with the relationship also said Aramco was said to be angry at Shell when refinery workers at the three Motiva plants went on strike in early 2015.
Shell led negotiations with the United Steelworkers union representing the workers, and the strike ended three weeks after the Motiva walkout.
Additional reporting by Liz Hampton in Houston and Josephine Mason and Jessica Resnick-Ault in New York; Editing by David Gregorio, Sandra Maler and Peter Cooney