Phillips 66 refinery sale offers test of future for motor fuel suppliers

By Erwin Seba

HOUSTON, Aug 25 (Reuters) - U.S. refiner Phillips 66's decision to market a Louisiana oil processing plant offers a key test of investors' views on the pace of the transition to electric vehicles, refinery industry experts said on Wednesday.

Phillips 66, the fourth largest U.S. refiner, on Tuesday said it has put its 255,600 barrel per day (bpd) Alliance plant on the market, citing "the evolving energy landscape." The 50-year-old plant makes gasoline, diesel and jet fuel for U.S. and Latin American markets.

Reuters on Tuesday reported Phillips 66 is in talks with a potential buyer. A spokesman declined to comment, calling any talks confidential.

Analysts said potential buyers may be willing to make a contrarian bet on motor fuel demand, pointing to private equity firms and rival Gulf Coast refiners Motiva Enterprises, Valero Energy Corp (VLO) and PBF Energy (PBF).

Motiva, Valero and PBF did not reply to messages asking about interest in the Alliance refinery.

"While there are a lot of uncertainties out there - mainly regulatory in terms of climate change or COVID mandates - the economic dust has settled so buyers are likely to get more serious again," said Garfield Miller, chief executive of investment banker Aegis Energy Advisors.

A private equity firm might consider buying Alliance as the anchor for a move into motor fuel, seeing Phillips 66 and other oil companies exit as an opportunity, he said.

Unsold refineries now on the market, such as Royal Dutch Shell's (RDS/A) nearby Convent, Louisiana, plant, could open the door to deals, estimates analyst Tudor, Pickering Holt & Co, which put a $500 million upper pricetag on the plant, which sits 20 miles (32 km) south of New Orleans on the Mississippi River.

Still, any buyers would face a difficult future with the Biden administration committed to supporting electric-powered cars and trucks, said Robert Yawger, director of energy futures for Mizuho Securities.

What buyer would "want to upgrade the thing for size when politicians are talking about five to 10 years (autos) running on electricity?" Yawger asked. (Reporting by Erwin Seba Editing by Marguerita Choy)

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