The proposed joint venture meets INEOS Refining’s strategic objectives, bringing a long term partner to the business with a jointly agreed investment programme for Grangemouth (Scotland) and Lavéra (France).
- “This offer is an important step on the way to forming a strategic partnership with PetroChina”, says Jim Ratcliffe, Chairman of INEOS. “It allows us to remain fully committed to our refining business as well as presenting an opportunity to further develop our interests in China and beyond.”
- Jim Ratcliffe adds, “We now intend to evaluate our future refinancing options for the group over the first half of 2011”.
Today PetroChina International (London) Co. Ltd. submitted an irrevocable offer to INEOS of US$1,015,000,000 for a 50% share in its European refining business. This business includes the refineries at Grangemouth in Scotland and Lavéra in France. The partnership with PetroChina will comprise a trading joint venture and a refining joint venture. A new Swiss company will be incorporated to hold the INEOS investment. The two joint ventures will be operated independently of the INEOS Group.
INEOS and PetroChina will now work towards forming the proposed joint ventures in Q2 2011.
“This new partnership will secure investment and the long-term sustainability of both sites in a highly competitive market and ensure we continue to be Europe’s leading independent crude oil refiner. We are delighted to be progressing PetroChina as a long term strategic partner,” said Calum MacLean, CEO INEOS Refining
This transaction will significantly enhance the Group's financial position. Group leverage was 4.3x EBITDA at the end of September 2010 and is expected to reduce to around 3.5x EBITDA following completion.
Jim Ratcliffe, chairman of INEOS, says, “This offer is an important step on the way to INEOS forming a joint venture with PetroChina. When completed we will have a strategic partner with significant refining expertise that is integrated upstream with very strong equity crude positions. This agreement allows us to remain fully committed to our refining business and presents us with an opportunity to further develop our technology business in China and beyond”.
Jim Ratcliffe continues, “As we move towards completing this joint venture, we now intend to evaluate our future refinancing options for the group over the first half of 2011.”
This deal will help create a true strategic partnership between the two companies. It will improve the long-term sustainability of the INEOS refineries, enhance security of supply for customers and secure jobs and skills in both the UK and France. The proposed joint venture is consistent with PetroChina’s strategy of building a broader business platform in Europe and of becoming a leading international energy company. The geographic location and production capabilities of the INEOS refineries are very favourable as both refineries are well located in terms of markets and access to raw materials and both have a significant production bias towards diesel, which is the fastest growing refined fuel in Europe.
The Grangemouth refinery is located on the Firth of Forth with direct access to crude oil and gas from the North Sea. The Grangemouth refinery processes around 210,000 barrels of crude oil per day and provides fuel to Scotland, Northern England and Northern Ireland.
The Lavéra refinery processes 210,000 barrels of crude oil per day. It is located on the coast of the Mediterranean crude oil trading basin, next to the port of Marseille and adjacent to a crude oil terminal. The refinery supplies fuel by pipelines into France, Switzerland and Southern Germany.
Both sites are integrated into INEOS’s downstream petrochemical production and remain strategic to its long-term business. Following this announcement, there will be a period of employee consultation prior to the signing of a binding agreement, subject to the approval of the relevant Government and regulatory bodies.