US petroleum refining company PBF Energy’s subsidiary PBF Holding has agreed to acquire Royal Dutch Shell’s 157,000 barrel-per-day Martinez Refinery and associated logistics assets in California for $1bn (£790m).

Along with the cash consideration, Shell, which is undertaking the transaction through its subsidiary Equilon Enterprises d/b/a Shell Oil Products US, will also be entitled to receive the value of crude oil supply, hydrocarbon inventory, and product offtake agreements, and other adjustments.

Shell said that the transaction is in line with its strategy to reshape refining efforts towards a smaller, smarter refining portfolio with a focus on integrating further with Shell Trading hubs, Chemicals, and Marketing.

Shell downstream director John Abbott said: “This deal is another step in our transformation to high-grade and optimise our portfolio to drive resilient returns.”

Martinez Refinery production details

The Martinez Refinery, which is located in the City of Martinez, refines and markets petroleum products such as gasoline, diesel and jet fuel under the Shell brand name. The products are distributed across the west and northern Midwest US to the company’s retail outlets.

The refinery, which has a Nelson Complexity Index of 16.1, is a high-conversion, dual-coking facility. Capable of capturing heavy/sour differentials, the Martinez Refinery is positioned strategically in Northern California for PBF Energy and offers operating and other synergies with the company’s Torrance Refinery in Southern California.

Post-acquisition, PBF Energy will expand its total throughput capacity to more than one million barrels per day, while its refining system will have a consolidated Nelson Complexity of 12.8.

PBF Energy chairman and CEO Tom Nimbley said: “The acquisition of the high-complexity, dual-coking Martinez refinery is a significant strategic step for PBF as we expand our West Coast operations and increase our total throughput capacity to more than one million barrels per day.

“Martinez is one of the most complex refineries in the country and a top-tier asset.”

Apart from the refining assets, PBF Energy will also be acquiring various onsite logistics assets that include a deep-water marine facility, product distribution terminals and refinery crude and product storage facilities with nearly 8.8 million barrels of gross storage capacity.

Shell’s associated branded fuel businesses – the Aviation terminal and the Catalysts business in the region, are excluded from the transaction. PBF Energy and Shell expect to sign crude supply and product offtake agreements to supply the latter’s branded businesses ensuring that Shell customers will have continued access to its branded fuels.

The deal, which is subject to meeting of customary closing conditions and receipt of regulatory approvals, is likely to be wrapped up in the second half of this year.

Shell and PBF Energy have also agreed to jointly review the feasibility of constructing a renewable diesel project designed to repurpose existing idled equipment at the Martinez Refinery.  The detailed feasibility review and planning for the proposed renewable fuels production facility is anticipated to take place after completion of the acquisition.