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Shell Canada refinery needed $600M investment

The Montreal Gazette

The Gazette July 16, 2010 4:28 PM

The Shell refinery in Montreal East is slated to become a fuel-storage facility, resulting in the loss of about 500 jobs.
Photograph by: Marcos Townsend, Montreal Gazette

Shell Canada disclosed Friday its 130,000-barrels-daily Montreal East oil refinery needed $600 million of capital investment to stay competitive and avoid conversion into a distribution terminal.

In an advertisement carried in several newspapers, the company said any potential buyer of the refinery “had to be able to finance a fair purchase price, the cost of working capital ($400-$500 million) and needed capital investments (another $600 million).”

Shell Canada said a strategic review of the refinery a year ago found it needed $600 million of investment to remain sustainable. It was not ready to invest that amount and decided to seek a buyer.

Initially more than 25 parties were contacted or contacted Shell, of which 17 made serious inquiries. Six of them went to due diligence when detailed operating information was provided.

In January Shell announced the conversion to a distribution terminal. Then it agreed with the Quebec government to delay the conversion and work with a special committee set up by Quebec City to seek potential buyers.

Five parties made a more detailed evaluation and had discussions with Shell personnel responsible for the transaction, Shell Canada said. Three withdrew and the other two expressed some interest — one was a small firm with no refinery experience.

“The remaining party was a credible refinery operator… but after serious negotiations… it unfortunately decided to drop out,” said Shell Canada. “Not one out of over 100 prospective purchasers saw an acceptable future for this site as a refinery and none presented a formal offer.”

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