Saudis Gain a Toehold in U.S. Oil : Aramco to Pay $800 Million for 50% of Texaco Network

Texaco Inc. said today that Saudi Arabia has agreed to pay $800 million for a 50% interest in Texaco’s refining assets and marketing system in the U.S. East and Gulf Coast regions.

The deal, also announced by Saudi Oil Minister Hisham Nazer, gives the Saudis a long-sought role in a joint venture with Texaco to refine crude oil and market products in the United States. It climaxes several months of intense negotiations.

The deal was made with the Saudi government-owned Arabian American Oil Co. (Aramco). The Texaco assets being sold, part of the company’s program to dispose of $5 billion worth of assets in a restructuring program, are in 23 states in the eastern United States and on the Gulf of Mexico, as well as in the District of Columbia.

The relationship between Texaco and Saudi Arabia, one of the world’s largest oil producers and the largest exporter, goes back 50 years. Texaco, along with Exxon Corp., Mobil Corp. and Chevron Corp., are operating partners with Saudi Arabia in Aramco.

Oil industry sources said Saudi Arabia, following in Kuwait’s footsteps in refining and selling its oil products in Europe, had been planning to enter markets in Western Europe and the United States since 1986.

‘Natural Partner’

Nazer told the official Saudi Press Agency: “Texaco is the natural partner for Saudi Arabia because of the company’s known experience in the refining industry in addition to the trained workers and laborers it has and its historic relationship with the kingdom.”

He said this will serve Saudi interests by providing a guaranteed outlet for its Arab light crude oil and was a good opportunity for the kingdom to participate in a beneficial commercial project.

Texaco said the venture will have the right to buy up to 600,000 barrels per day of crude oil from Saudi Arabia at prevailing market prices and will have the exclusive use of the Texaco trademark for marketing gasoline, diesel fuel and home heating oil in the 23-state region.

Texaco said that in addition to Texaco refineries in Delaware City, Del.; Convent, La., and Port Arthur, Tex., the joint venture’s assets will include 49 terminals, about 1,450 owned and leased service stations and a branded distributor network of more than 10,000 more stations.

The company said it expects no significant changes in operations or staffing levels as a result of the venture.