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BP Announces Sale of California Refinery Following 2010 Gulf Oil Spill

According to a recent article featured in the Houston Chronicle, BP’s recent 1 billion dollar sale of its California refinery can be considered a part of what some are calling a “corporate garage sale.” Sources say the move was a part of BP’s long term plan to raise money and curb global operations by divesting 38 billion dollars in assets by the end of 2013.

According to the Chronicle, all is going as planned considering BP has raised $26.5 billion from asset sales in the past two years. This leaves around $11 billion to be raised in order for the company to reach its goal. According to BP, the company plans to keep its assets which it can create the highest value and generate the most profit, and sell off the rest. The BP divestment strategy comes in the wake of the 2010 Gulf Coast oil spill, after which BP set up a $20 billion trust from which to pay expenses. The company then raised the divestment to $30 billion later on.

Although BP may have been forced into the divestment plan, industry insiders believe that BP has received good value for the assets which have been sold. Analysts say that because there was more interest in BP assets than anticipated, BP was able to take its time in order to maximize the value of its assets. BP representatives have reported that a significant portion of the divestments have been in the exploration-production area. Reportedly, BP has sold upstream interests in Colombia, Venezuela, Vietnam, the North Sea, and the U.S.

Further, sources say that in May of this year, BP identified several older fields in the Gulf of Mexico it planned to sell, including the Marlin, Horn Mountain, Holstein, Diana Hoover, and Ram Powell. BP has also been adamant that the divestment program does not mean that the company plans to leave the Gulf of Mexico. Reportedly, the company currently has 6 drilling rigs in the Gulf and plans to have 2 more by the end of 2012. BP reports that it plans to spend $4 billion a year over the next 10 years on a new wave of projects in the region. In June, BP says it began production at the Galapagos development, a deep-water project 140 miles southeast of New Orleans that is tied to the Na Kika platform.

Reportedly, BP is following the same divestment pattern for its natural gas assets, as it has sold off mature and lower-producing assets. In June, for example, it sold the Jonah and Pinedale natural gas fields in Wyoming to Houston-based Linn Energy for $1 billion. Industry insiders say the deal was a positive for Linn as well, as the producing fields require relatively little investment to run. Sources say the upstream divestments will bring BP production to about 2.3 million barrels of oil equivalent per day, down from its 2009 level of just under 4 million barrels.

Reportedly, BP is also trying to lighten its refinery portfolio, having recently sold its refinery in Carson California for $1.2 billion dollars. However, some financial analysts view the potential sale of its Texas City refinery as more of a challenge, because of its size and its history of maintenance issues and fatalities, including the 2005 explosion that killed 15 workers. Financial insiders say the refinery is exceptionally large and some people doubt whether the refinery can be sold in a timely manner. Sources say the refinery can process 475,000 barrels of crude per day, compared with 265,000 barrels at the Carson, California plant.

According to the Chronicle, BP has also recently announced that after a history of royalty, tax and legal issues, it plans to sell its half interest in TNK-BP, a Russian joint venture oil company. Reportedly, Alfa Access Renova, a Russian consortium that owns the other 50 percent, has expressed interest in buying BP's share, as has Rosneft, Russia's state-owned oil company. Reportedly, while the expected proceeds could range from $20 billion to $30 billion, the deal is not included as part of BP's $38 billion divestment goal and does not have the 2013 deadline.