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Shell to divest 15 percent of its refining assets

Reuters

Tue Sep 15, 2009 1:04pm EDT

By Emma Farge

BRUSSELS (Reuters) – Oil major Royal Dutch Shell (RDSa.L) plans to divest its global refining assets to the tune of around 15 percent in the next few years, a senior company official said on Tuesday.

“We are looking to reduce overall refining assets by around 15 percent,” Mark Gainsborough, Shell’s executive vice president of downstream strategy, said in a panel discussion at an industry conference.

That represents about 600,000 barrels per day.

The figure is larger than the combined capacity of the refineries, which the company said in March might be sold.

Shell said it could sell refining assets in Germany and New Zealand representing 200,000 bpd capacity.

It is also looking to sell its 267,000 bpd Stanlow refinery in the UK and industry sources said India’s Essar Oil had submitted bids.

Most oil majors have been selling small oil refineries to focus on large, complex plants equipped with advanced refining systems such as Shell’s Pernis, Europe’s largest, in the Netherlands.

After selling a number of refineries and fuel retail operations in Europe and Africa in recent years, Shell now has a refining capacity to process about 4 million bpd of crude oil.

About 45 percent of Shell’s refining capacity is located in Europe, where in general refineries are relatively simple and old while competition from new, advanced and cost effective refineries in India and the Middle East has been increasing.

“Europe is not the place to have an out-and-out merchant refinery,” Gainsborough said. “For an asset to have a long-term future it needs to be world scale or be in a very secure niche.”

FINANCIAL PLAYERS AND TRADE BUYERS

Gainsborough said Shell had been in talks with a number of potential buyers for the German assets.

“There are still some financial players out there and there are plenty of trade buyers,” he said. He declined to give further details.

In a separate interview with Reuters on the sidelines of the Brussels conference, Gainsborough said Shell’s German refineries were “just too small.”

He added that European refiners below 200,000 bpd would struggle to compete on the international export market.

Refineries on the U.S. East coast probably needed to be 400,000 bpd to succeed in current market conditions, he said.

On the other hand, Shell had not ruled out buying downstream assets even as it looked to make further refinery divestments.

“If a good opportunity comes up, even in Europe, we would still take a look,” Gainsborough told reporters.

(Editing by Ikuko Kurahone and James Jukwey)

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REUTERS ARTICLE

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