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Russians prepare £1bn grab for UK fuel supplies

The Sunday Times: March 28, 2010

GAZPROM, Russia’s state-owned gas giant, is preparing an audacious bid to become one of the biggest fuel suppliers in Britain.

The company is expected to lodge an offer this week for a network of 800 petrol stations and the Lindsey oil refinery at Killingholme, Lincolnshire. The assets have been put up for sale by Total, the French oil group. It has hired JP Morgan, the investment bank, to sell its UK business, which employs 5,000 people. The business is expected to fetch more than £1 billion.

The prospect of the Kremlincontrolled giant owning key parts of the UK oil infrastructure could worry the government. When Gazprom was rumoured to be looking at a bid for Centrica, owner of British Gas, in 2006, ministers met to examine the “possible consequences resulting from any takeover of a major UK energy supplier”.

The auction is part of a remarkable shake-up of Britain’s oil refining and distribution industry. Half of the refining capacity, built up in the 1960s and 1970s to take production from a booming North Sea, is up for sale as energy giants look to sever ties with the low-margin, low-growth British market.

The most likely buyers are energy firms from the developing world eager for an entry point to European markets.

Chevron Texaco, the American oil group, has hired Deutsche Bank to sell its Pembroke refinery in Wales, which employs 1,400, as well as its network of petrol stations for up to £1.3 billion.

Royal Dutch Shell is in talks with Essar, the Indian conglomerate, to sell its Stanlow refinery near Ellesmere Port, Cheshire.

Gazprom is expected to bid for the Total assets through its oil arm, Gazprom Neft. Included in the Total sale is the 247km underground pipeline from Lindsey to the Buncefield fuel depot, which serves southeast England and Heathrow airport. Much of the site was destroyed in an explosion in 2005 but there are plans to rebuild it.

Other suitors include Essar and Valero, the American refining giant, and at least one private equity bidder. The same players may be interested in Pembroke, which could also attract oil traders such as Vitol.

There is an outside chance a buyer could attempt a takeover of more than one of the refineries, giving it a dominant position in Britain.

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1 Comment on “Russians prepare £1bn grab for UK fuel supplies”

  1. #1 Wilt Staph
    on Mar 28th, 2010 at 19:10


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