Royal Dutch Shell PLC has selected Essar Oil as the preferred bidder for its three European refineries.
“Yes. Essar has entered into an exclusive negotiation with Shell for buying Shell’s Refinery at Stanlow in the UK and Heide and Harburg in Germany. However, it is too premature to comment any further on the matter,” said an Essar spokesperson.
“Shell can confirm today that we are in negotiations with Essar for the potential sale of Stanlow, Heide and Harburg refineries. For the time being, Shell will not be holding discussions with any third party other than Essar, although this does not guarantee a sale and it is too early for Shell to confirm a deal or comment on timescales,” said Shell spokersperson, Ms Sally Hepton.
Neither Essar nor Shell has divulged the timeframe or cost details of the acquisition. Till a few months ago, the other companies in the fray included Libya’s National Oil Corporation, US oil refiner Valero and an investment vehicle controlled by the Saudi royal family.
The latest expansion bid from Essar follows its acquisition of a 50% stake in the Mombasa-based Kenya Petroleum Refineries in July. The Indian refiner plans to invest nearly USD 450 million to upgrade and expand the refinery. It will also market the products in East Africa.
Shell has embarked on a recast programme that involves selling off about 15 per cent of its global refining capacity of 600,000 barrels a day, which translates into 30 million tonnes. The company was also in the news a few months ago for contemplating a sale of its refining and distribution assets in New Zealand.
At that point, Hindustan Petroleum Corporation was rumoured to be zeroing in on a buyout but nothing happened since.
While Shell does not foresee a recovery in refining margins in the mid-term, Essar is on an expansion drive in the hope that global oil demand cannot remain low forever.