This leads to some prospective buyers actively approaching the would-be sellers to explore opportunities on buying some of these assets on sale.
However, responses so far from oil majors to advances from buyers have been less than encouraging, industry sources told OPIS on Wednesday.
“We are interested to buy, but they don’t seem to be actively seeking a buyer for those downstream assets,” a source said.
The cold response could be due to the current we downstream asset valuation and a lack of urgency to liquidate.
In the U.S. and Canada, prospective buyers are eyeing Shell’s 130,000-b/d Montreal oil refinery, Lockport oil terminal in Illinois and a terminal in Puerto Rico.
Shell plans to shut the Montreal refinery in the fall after failing to find a buyer at the right price in the past 11 months.
On the East Coast, Sunoco’s 152,000-b/d Eagle Point refinery is also seen as an acquisition target.
Sources said that there was interest to convert mothballed refineries into oil storage terminals.
“Both Shell and ConocoPhillips have been vocal about selling downstream assets,” said Daniel Katzenberg, Director, Oil & Gas Research Oppenheimer & Co. Inc.
“And I would imagine BP will also now be looking to sell off some,” he added.
However, Shell and ConocoPhillips have stated that these will not be fire sales, and they will work to get fair value for assets,” Katzenberg said.
Given the depressed refining environment, the majors are not in a hurry to sell in a weak market.
“These companies are large enough, have strong enough balance and generate enough cash flow to hold out for a pick up in the market,” he said.
Earlier this year, Royal Dutch Shell said that it planned to shed 15% of its lobal refining capacity and 35% of retail markets as part of its plan to focus on profitability.
The oil major is expected to chalk up asset sales of $1-3 billion per year as Shell exits from non-core positions across the company.
ConocoPhillips announced in March that it earmarked $2-$4 billion in refining and midstream asset sales for 2010-2011.
ConocoPhillips is in talks with both integrated oil companies and independent refiners regarding the potential sale of some of its refineries, according to Clayton Reasor, ConocoPhillips’ vice president of corporate and investor relations recently.
However, current historically low valuations for refining assets could result in the company putting off some refinery sales until closer to 2012, he said.