Total Sidelines Valero in Deal with LUKoil for Dutch Refinery Stake

Total’s exercise of its pre-emption rights to buy Dow’s 45% stake in the Total Raffinaderij Nederland (TRN) refinery undercuts U.S.-based refiner Valero Energy’s deal in principle last month to buy the stake for US$725 million. The deal provides LUKoil with greater downstream access in Western Europe, where the Russian oil major has long sought to acquire refining capacity, with little success. Total’s decision to pre-empt the Dow-Valero deal not only keeps Valero from competing on the French company’s European turf (not to mention avoiding an awkward partnership at TRN between the two firms), but may also—by giving LUKoil the opportunity to expand its portfolio in Europe—provide Total with its own opportunities to eventually expand upstream in the Russian hydrocarbon sector. The Russian firm, which has sought for years to expand its portfolio into Western Europe, only to run into fierce political opposition and/or see its acquisition bids trumped by other players, was only too happy to clinch the deal with Total and come out on the winning side of a pre-empted deal. LUKoil’s consideration for Dow’s former stake will amount to the same US$725 million Valero was prepared to pay. (June 22, 2009)