Shell to Divest Refineries
By Zacks Equity Research
On Tuesday August 18, 2009, 1:30 pm EST
Royal Dutch Shell is planning to sell three European refineries as part of its restructuring of downstream operations. Of these, the companys sole UK refinery Stanlow in Ellesmere, Cheshire is the most important. The other two are German refineries in Hamburg and Heide. Shell is also looking to sell its Montreal East refinery in Canada, which has a capacity of 121,000 barrels per day. The Stanlow refinery has a capacity of 272,000 barrels a day (producing about a sixth of UKs petrol output) and employs 1,000 people and 800 contractors. The two German refineries have an aggregate capacity of about 200,000 barrels per day and employ about 500 people each.Although Shell announced names of potential bidders for the European refineries, it has not disclosed any for the Montreal facility. Valero Energy Corp. (VLO), which is looking to expand in Europe and Libya, is one of the bidders for the European refineries. Indian conglomerate Essar Oil is another concerned party.However, Shell is not exiting the refining business totally. The sale of these refineries is part of the companys cost-cutting initiatives, which has become essential to guard against the recession that hit demand for petroleum products and pulled down oil prices by more than half. The company also announced a $500 million investment in a new hydrodesulphurization plant at its Pernis refinery in the Netherlands.In 2008, Shell spun off its REFIDOMSA refinery in the Dominican Republic. In total, Shell had divested more than $6 billion worth of assets in 2008 after about $10 billion in 2007. This takes the total divestment to over $28 billion over the last four years.While the current strategy to divest non-core assets and undertake major investments is a step in the right direction, it remains to be seen how Shell moves towards the stated goal of achieving top-quartile performance.
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