Valero Energy Corp. (NYSE: VLO) said it has agreed to acquire Chevron Corp. (NYSE: CVX)'s Pembroke oil refinery in Wales, U.K., as part of a deal valued at up to $1.73 billion.

The sale price is $730 million for the refinery, plus an additional $1 billion for Chevron’s inventory and other items.

The Pembroke refinery has a total throughput capacity of 270,000 barrels per day, of which 220,000 barrels per day is crude capacity, and is one of Western Europe's largest and most complex refineries, Valero said.

This acquisition of quality assets enhances our portfolio and gives us opportunities for profitable growth, said Valero Chairman and CEO Bill Klesse. After exiting refining in the U.S. East Coast last year, this acquisition provides an opportunity for our company to supply that market more competitively, when it's economic to do so.

Klesse said the Pembroke refinery remained profitable and cash-flow positive even during the depths of the economic downturn in 2009. He expects the transaction to immediately add to San Antonio-based Valero's earnings per share.

The transaction is expected to close during the second half.

Apart from the Pembroke facility, Chevron also holds four major product pipelines and 11 fuel terminals, a 14,000 bpd aviation fuels business, and a network of more than 1,000 Texaco-branded wholesale sites.

Chevron said it will retain its upstream, lubricants and Oronite additives businesses in Europe, as well as its aviation business in Sweden, Greece and the Benelux.

“We’re concentrating our downstream portfolio primarily in North America and the Asia-Pacific region,” said executive vice president, Chevron Downstream & Chemicals, “markets where we enjoy our greatest competitive strength and opportunities for growth.”

Chevron recently reached a sales agreement for most of its downstream assets in Spain. Since 2010, the company has agreed to sell downstream assets in more than 20 other countries, mostly fuels marketing businesses in the Caribbean and southern Africa. These transactions are expected to be concluded during 2011 as necessary regulatory approvals are received.

Chevron said it is soliciting bids for certain operations in the Caribbean and select Central America markets. Chevron will continue current downstream operations in Colombia, El Salvador, Guatemala, Honduras, Panama, Mexico and Brazil.

Shares of Chevron are trading 0.10 percent higher at $99.01 at 09:16 am EST Friday on the NYSE, while Valero shares surged 5.36 percent to $27.75.