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Essar bids for British oil refinery in Shell auction

The Times

August 18, 2009

Carl Mortished, World Business Editor

Essar, the Indian energy, steel and shipping group, has made a bid for Royal Dutch Shell’s Stanlow refinery at Ellesmere Port, Cheshire, part of a £1.2 billion offer for three fuel manufacturing plants. The other two are in Germany, at Heide and Harburg.

Essar’s bid came as the deadline closed yesterday in an auction of the three refineries that is likely to provoke anxiety about employment in the North West of England.

Stanlow is Shell’s last remaining refinery in the UK. The company closed Shell Haven, its Thames Estuary refinery, in 1999 and the site was redeveloped by P&O Ports, later taken over by DP World, the Dubai company.

The Shell auction, run by Lazard, has drawn interest from national oil companies, including Saudi investors and Libya’s National Oil Corporation. The company is believed to be seeking as much as £1.5 billion for the three assets, but oil refining is suffering from a severe squeeze on margins because of weak demand for road fuel in Europe and relatively high crude oil prices.

Shell is shifting its refinery investments to Asia as ambitious Middle Eastern and Asian companies bid for access to European markets. Essar said that it wanted more distribution capacity in Europe.

Essar recently set up a mergers and acquisitions team in London to assess deals and is likely to push its case as an investor that is willing to invest in the assets and is more politically palatable than rivals such as an investor from the Middle East or Libya.

Libya’s investment ambitions have become a sensitive issue over the proposed repatriation of Abdul Baset Ali al-Megrahi, the convicted Lockerbie bomber.

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