MRO looking for a JV in the Canadian oil sands. Not a bad idea given the status of the North Sea:
Marathon seeks oil sands equity swap
NORVAL SCOTT
July 17, 2007
CALGARY -- United States-based Marathon Oil Corp. is actively seeking to invest in Alberta's oil sands and is in talks with potential Canadian partners over swapping equity in its U.S. refineries for a stake in an oil sands project, a company executive said last week.
However, the company has to resolve differences with potential partners over the valuation of such an exchange, and won't be rushed into reaching any arrangement, said David Roberts, Marathon's senior vice-president of business development.
Marathon - the fourth-largest U.S.-based integrated oil and gas company and the fifth-largest U.S. refiner - has long expressed an interest in acquiring upstream equity in Alberta. The firm owns seven refineries in Illinois, Michigan, Ohio, Kentucky, Minnesota, Texas and Louisiana and it is one of the biggest refining presences in the U.S. Midwest, the largest market for Canadian crude exports. Marathon sees itself as a natural partner for Canadian firms who need to find extra refining capacity in North America to process future heavy crude production from new oil sands projects.
However, Marathon has been unable to strike a deal with Canadian producers. The company was rumoured to be among the potential partners in talks for an oil sands joint venture with EnCana Corp. before the Canadian producer struck a deal with ConocoPhillips Co. in early October, while Husky Energy Inc., another firm looking for downstream equity, resolved the question in part by purchasing Valero Energy Corp.'s Lima, Ohio, refinery earlier this year.
"Marathon has an answer for the Canadian oil sands, but thus far we have obviously not been asking the right question," Mr. Roberts said. He added that the company would like a deal along the lines of the EnCana-ConocoPhillips equity swap, whereby EnCana took a stake in a ConocoPhillips refinery in exchange for part of its oil sands project, as that would allow Marathon and a partner "to capitalize on opportunities all the way down the value chain."
Mr. Roberts estimated that for a Canadian partner, reaching a deal with Marathon to process heavy crude in its existing refineries would be around 40 per cent cheaper than constructing an upgrader in Alberta, providing a "dramatic effect on the economics of an oil sands project."
While Mr. Roberts wouldn't name the companies Marathon is talking with, there's no shortage of potential upstream partners seeking downstream help. Western Oil Sands Inc. has launched a strategic review of its oil sands operations and could be amenable to a partner like Marathon, while even EnCana and Husky still haven't totally resolved where all their future crude output will be processed, despite their other downstream deals. |
