Mon Jul 2, 2012 9:48am EDT
* Joint venture plans upgrades, expansion
* Philadelphia plant to take more Bakken crude
* JP Morgan in crude supply, fuel offtake deal with JV
By Janet McGurty
NEW YORK, July 2 (Reuters) - Sunoco Inc and private equity firm Carlyle Group LP reached a joint-venture agreement on Monday to keep the largest refinery on the East Coast in operation.
Under terms of the deal, Sunoco will retain a minority stake in the 335,000-barrel-per-day (bpd) plant, the oldest continuously running refinery in the region, while Carlyle will oversee its daily operations, the companies said in a statement.
JPMorgan Chase & Co's commodities division will supply the refinery with crude and non-crude feedstocks and purchase fuel produced by the plant for offtake.
The joint venture, to be called Philadelphia Energy Solutions, will invest in several new projects at the plant. They include an upgrade of the catalytic cracker; construction of a high-speed rail train to take higher volumes of U.S. crude including oil from the Bakken region; and construction of a mild hydrocracker and a hydrogen plant.
"Together we've re-imagined the Philadelphia refinery and its role as a critical energy hub in the Northeast," said Carlyle Managing Director Rodney Cohen in a release.
"The refinery's exceptional location and infrastructure will enable the joint venture to create new business opportunities related to Marcellus Shale natural gas fields."
The two companies have been in exclusive talks since April over forming a venture that would save the plant after Sunoco said it would have to sell or close it by August due to poor margins.
Carlyle became the second white knight to rescue an imperiled refinery on the U.S. East Coast, where diminishing demand, high imported crude costs and tough foreign competition have hurt profit margins for years.
Last month, Delta Air Lines Inc bought the 185,000-bpd Trainer refinery, located several miles away, from Phillips 66.
The Philadelphia deal will help temper fears that fuel supplies could run short during the peak summer period -- driving up prices and stirring concerns at a local and national level.
It would also effectively mark Sunoco's exit from the refining sector, ending the company's over century-long tradition in the region.
Sunoco has already closed the 178,000-bpd plant in Marcus Hook, several miles away, while Trainer has been saved.
Sunoco shares rose 0.3 percent to $47.60, while Carlyle was up 2.3 percent to $22.94.
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