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VOL. 124 | NO. 120 | Monday, June 22, 2009

Total Thwarts Valero in Refinery Deal

By ERNEST SCHEYDER | AP Energy Writer

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NEW YORK (AP) – European oil giant Total S.A. blocked Valero Energy Corp. from buying Dow Chemical Co.’s stake in a Dutch refinery Friday, instead choosing Russia’s Lukoil Co. for the lucrative venture.

The move dents San Antonio, Texas-based Valero’s plans to grow in Europe, a market consistently hungry for diesel, jet fuel and other refined products.

Meanwhile, Valero’s Memphis refinery will remain open after fears that state legislation to start making gasoline available to wholesalers without ethanol would force the facility to close. The plant processes about 190,000 barrels per day and employs about 500 people.

While the Dow sale to Valero was first announced last month, it still needed Paris-based Total’s approval, which was thought by many to be a foregone conclusion.

Yet Total – which owns 55 percent of the Vlissingen, Netherlands, refinery, compared to Dow’s 45 percent – opted to bypass Valero in favor of Lukoil, already a major supplier to the facility.

Dow and Valero were aware Total had a right of first refusal, Dow spokesman Bob Plishka said.

Financial terms of the deal – roughly $725 million – remain the same, which is positive for cash-strapped Dow Chemical.

Dow bought rival Rohm & Haas earlier this year for more than $16 billion. Dow had tried to scuttle the deal, citing the recession and a separate failed joint venture. But Rohm sued, arguing that its contract was ironclad. Rohm ultimately prevailed, but the buyout added roughly $9 billion in debt to Dow’s balance sheet.

Since the deal closed on April 1, Dow has been moving aggressively to cut costs, save cash and pay down debt by laying off thousands of workers and selling assets.

For its part, Valero said it will continue to poke around for other investment opportunities.

“Although we are disappointed about this result, we will continue to seek opportunities to acquire high-quality assets at attractive prices,” Chairman and CEO Bill Klesse said in a statement.

Copyright 2009 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

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