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Essar May Rise After Report That Shell May Acquire 10% Stake

By Fred Pals

Nov. 23 (Bloomberg) — Essar Oil Ltd. may rise in Mumbai after a report that Royal Dutch Shell Plc is acquiring a 10 percent stake in the company as part of a deal to sell three refineries to the Indian company.

The stake is valued at about 17 billion rupees ($360 million) and will account for less than half the $800 million value of the three plants, the Economic Times reported Nov. 21, citing unidentified people. Essar and The Hague-based Shell have been in exclusive talks since Oct. 30 on the sale of the Stanlow refinery in the U.K. and the Hamburg and Heide refineries in Germany.

Shell is reviewing the future of its refineries worldwide as it seeks to reduce costs after the global recession curbed demand for fuel and dragged down prices. Shrinking profit margins have prompted refiners to idle and sell plants and slow operating rates.

Essar Oil, India’s second-largest non-state refiner advanced 1.95 rupees, or 1.5 percent, to 136.85 rupees on Nov. 20. The stock has added 57 percent this year.

An Essar Oil spokesman declined to comment when contacted by phone. Wim van de Wiel, a spokesman in The Hague for Shell, declined to comment when contacted by phone.

The Hamburg refinery can process 110,000 barrels of oil a day while Heide has a capacity of 91,000 barrels a day, according to data compiled by Bloomberg. Stanlow, Britain’s second-largest refinery, can process 233,000 barrels a day.

To contact the reporter on this story: Fred Pals in Amsterdam at [email protected]

Last Updated: November 22, 2009 13:30 EST

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