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Sonatrach to buy ExxonMobil's Augusta refinery: Update

09 May 2018 13:31 (+01:00 GMT)
Sonatrach to buy ExxonMobil's Augusta refinery: Update

Adds Sonatrach's comments in paragraph 4

London, 9 May (Argus) — Algeria's state-owned Sonatrach has agreed today to buy ExxonMobil's 170,000 b/d Augusta refinery, in Sicily, in a bid to cut its product import bill.

The sale includes three associated terminals in Augusta, Palermo and Naples, and related pipelines. The deal is scheduled to be completed by the end of this year. ExxonMobil said will continue to supply oil products to Italy. It has a 74.14pc stake in the Sarpom joint venture with Italian firm API. Sarpom operates Italy's 174,000 b/d Trecate refinery.

"Sonatrach is extremely proud to have its first international investment in refining in Italy, and in particular in Augusta," the firm's chief executive Abdelmoumen Ould Kaddour said.

"The Augusta refinery is an ideal asset because of its location and because of the possible synergies with the Skikda refinery," the firm said. Augusta can process Algeria's Sahara Blend and residual fuel oil from the 350,000 b/d Skikda refinery, making it a good fit, Sonatrach said.

The firm increased investments in the downstream last year in pursuit of a government policy to reduce Algeria's reliance on oil product imports. Sonatrach imported around $2bn worth of oil products last year, the firm said earlier this month. It is currently upgrading its 58,000 b/d Algiers refinery to increase its capacity to 74,000 b/d and boost production of oil products meeting international specifications. Two new refineries — Tiaret and Hassi Messaoud — are scheduled to come online from 2020.

The stop-gap solution of buying refining capacity abroad has been under discussion for some months. The firm expressed interest in buying the 320,000 b/d Isab refinery in Italy from Russian owner Lukoil. Lukoil earmarked the facility for sale last year, hoping that stronger refining margins in southern Europe would attract interest, but did not appear to be in a hurry to close a deal even though Iran and Azerbaijan, as well as Algeria expressed interest.

Sonatrach struck a deal to supply at least 1mn bl of light-sweet Saharan Blend crude each month to be processed abroad by trading firm Vitol in January, again with a view to reducing product imports. Algeria receives the refined products resulting from this arrangement, which started in February. Vitol sent the first cargo of Algerian crude under the supply deal to the Mediterranean port of Fos, France, at the beginning of February.

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