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Shell rejects bids, will close Montreal refinery


Fri Jun 4, 2010 1:33pm EDT

Alberta (Reuters) – Royal Dutch Shell Plc (RDSa.L) will proceed with plans to close its Montreal refinery and convert it to a fuel terminal after deeming two expressions of interest in buying the plant too cheap, it said on Friday.

Shell expects to start shutting the 76-year-old refinery’s major processing units in September. The closure will affect about 500 jobs and leave Quebec with two refineries.

The company had announced plans to shut the 130,000 barrel a day plant in January, but at the request of the Quebec government gave potential suitors more time to make proposals.

It had received two expressions of interest just before its June 1 deadline.

“There was a significant valuation gap and Shell will no longer pursue discussions with the interested parties,” the company said in a statement.

Shell did not disclose the identity of the suitors or the proposed terms.

Quebec Economic Development Minister Clement Gignac had said he was willing to entertain requests for funding for a deal as he sought to preserve the jobs. However, his spokeswoman said on Thursday he had yet to be contacted.

Shell does not expect the refinery closure to result in a tight fuel situation in Quebec, where Valero Energy Corp (VLO.N) and Suncor Energy Inc (SU.TO) run the province’s remaining plants, spokesman Larry Lalonde said.

“We will continue to be distributing fuel through our Montreal East light oil terminal, then after the terminal is up and running toward the second quarter of 2011 we will be importing finished diesel, gasoline and aviation fuels,” Lalonde said.

Shell put the refinery up for sale last year, saying it did not fit into its long-term strategy. The closure will leave the company with refineries in Edmonton, Alberta, and Sarnia, Ontario.

The Montreal plant is one of a number in North America targeted for sale or closure as oil companies struggle with weak profit margins. But in recent months some buyers have emerged for some refining operations.

Last month, three private equity firms teamed up to buy Marathon Oil Corp’s (MRO.N) Minnesota refinery and retail network for about $800 million.

On Tuesday, PBF Energy Partners LP, an investment fund led by refining veteran Tom O’Malley, closed a $220 million acquisition of the Delaware City, Delaware, refinery from Valero. That plant had been shut since November.

(Editing by Rob Wilson)

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