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Labour issues hold up Shell’s sale of Stanlow refinery


Labour issues hold up Essar’s deal with Shell

By Yassir A Pitalwalla   Jan 19 2010, Mumbai

Royal Dutch Shell has for the second time extended its exclusive negotiations with Essar Energy Holdings on the sale of three of its European refineries. The two sides still have to settle issues relating to personnel, pensions and health, and safety and environment liabilities.

The exclusive talk period was first extended in November and is believed to have ended in December.

David Williams, spokesperson for Royal Dutch Shell, confirmed to Financial Chronicle that the exclusive negotiations were still on but declined to give details. An Essar spokesperson gave the same response.

An industry official said Ruia family members and senior executives, including Essar Oil’s managing director Naresh Nayyar, are negotiating with Royal Dutch Shell. He said some issues had already been settled. But pensions, human resource deployment and contracts and potential liabilities with respect to health safety and environment are still unresolved issues.

Pension issues had slowed down the Tata bid for Jaguar Land Rover and Corus. British pension schemes tend to have unfunded liabilities that may require topping up on a periodic basis in line with the law, according to experts. Health, safety and environment regulations have also become key issues.

One of the three refineries on sale is at Stanlow in the UK. On November 20, Graham Daley of UNITE, Britain’s largest trade union and the one officially recognised at the refinery, wrote to Nayyar saying that Essar would inherit an existing trade union recognition dispute with Shell.

Daley said UNITE wanted to meet Nayyar before a sale agreement was signed. “I have been involved in transfers between European business and Indian business in the past, and great difficulties could have been avoided if we had met before the sale had been completed.”

His letter further said, “In one particular instance the purchasers of the business were unaware of the costs of providing occupational pension schemes, and of complying with our stringent health and safety standards. Had they known they would have negotiated a lower price for the business.”

The three refineries have a combined capacity of 26 million tonnes per annum (mtpa) along with associated infrastructure, though the utilisation is between 20 and 23 million tonnes.

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