It appearsthat Marathon Ashland Petroleums Group I base oil plant in Catlettsburg, Ky., will not become a wholly-owned asset of Marathon during the first quarter. The joint venture partners announced last March that they had reached a tentative agreement for Ashland to divest its 38 percent share in MAP. Among other prerequisites, the deal hinged on an agreement by the Internal Revenue Service to give the transaction favorable tax treatment.
Ashland originally said it hoped to receive an IRS decision before the close of this year, but the company announced yesterday that it probably will not meet that schedule.
Ashland has not resolved all issues with the IRS and is exploring alternatives for the resolution of these issues, the company said in a written statement. At this time, Ashland cannot predict whether the requested rulings will be received. If the requested rulings are not received, the transaction would have to be modified or terminated. In any event, Ashland does not believe that a transaction will close earlier than March 2005.
MAPs refining assets include the Catlettsburg base oil plant, which has capacity to produce 6,700 barrels per day.
The U.S. base oil markethas been calm the past few weeks, as the industry entered its slowest season of the year without any disruptions to roil the waters. Buyers and sellers are now turning attention to 2005, which is lining up to start the same way. The paraffinic market is scheduled to have a less hectic start-of-the-year maintenance season than it did in 2004.
Citgo and Motiva appear to be the only paraffinic producers to have scheduled winter turnarounds. Market sources say Citgo plans to close its Lake Charles, La., Group I plant in January, andMotiva will shut down its Group II plant in Port Arthur, Texas, the following month. Three plants shut down during the first quarter of 2004, so that some base oil buyers worried a year ago about the possibility of supply disruptions. As it turned out, all three of those turnarounds went smoothly.
Posted prices for paraffinic base oils were unchanged this week. The price of crude oil on the New York Mercantile Exchange closed yesterday at $41.86, 30 cents higher than a week earlier.
Historic U.S. posted base oil prices and WTI and Brent crude spot prices are available for purchase in Excel format.