Saudi Arabia and Texaco Inc. have signed a $1.8 billion deal creating a joint venture to refine, distribute and market oil products in 23 American states.
The deal gives the kingdom, the world's biggest crude oil exporter, access to the world's biggest oil market and is a major step toward integrating its operations from the well to the gas pump.Other OPEC exporters, notably Kuwait, have also begun taking stakes in "downstream" operations in the West to secure outlets for their crude oil and insulate their economies from volatility in crude oil prices.
Saudi Arabia said it paid $812 million for a 50 percent stake in Texaco's refining assets and marketing system in 23 U.S. states.
A joint statement said the deal would result in about $1.8 billion in cash benefits and savings for Texaco, the third largest American oil company.
The agreement, signed in the presence of Saudi Oil Minister Hisham Nazer and Texaco president and chief executive officer James Kinnear, gives the new joint venture, called Star Enterprise, the right to buy up to 600,000 barrels daily of Saudi crude oil at market prices.
The statement said the Houston-based joint venture, due to start operating by Dec. 31, would rank third behind Exxon Corp. and Mobil Corp. in oil sales in the 23 states and 10th in the whole of the United States.
Included in the deal are some 1,400 owned and leased service stations and a branded distributor network of about 10,000 stations, together with refineries at Port Arthur, Texas, Convent, La. and Delaware City, Del.
Nazer told reporters that Saudi Arabia was considering other such projects worldwide but would not say with whom or when more agreements might be signed.
He said the Texaco deal guaranteed Saudi Arabia a niche in one of the world's fastest growing products markets. Saudi Arabia is aiming for a strong and integrated oil industry "able to stand on its own feet in a very competitive market," he said.