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Aus petrol industry set for shake-up

Shell chief executive Peter Voster said in November the company was “entering into a divestment phase” amid rising costs for energy projects and investor concern about capital expenditure.

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January 7, 2014

Australia’s A$50 billion (NZ$54b) petrol industry is set for its biggest shake-up in decades, with energy majors Royal Dutch Shell and BP considering the sale of refineries and petrol stations in order to free up cash for their core energy production businesses.

It is understood Shell is in talks with at least two parties – a large private equity firm and a consortium including investment bank Macquarie Group – over the A$3b sale of 900 petrol ­stations and its refinery in Geelong.

While sources close to Shell described the negotiations as “preliminary”, it is believed the Anglo-Dutch energy giant is committed to selling what are described as “downstream” assets to focus on its main business of energy exploration, development and production .

Shell chief executive Peter Voster said in November the company was “entering into a divestment phase” amid rising costs for energy projects and investor concern about capital expenditure.

Shell, which has a partnership with supermarket operator Coles in Australia, sold its petrol stations in New Zealand in 2011 and has had the Geelong refinery on the market since April.

Shell’s NZ assets were bought by infrastructure fund manager Infratil and New Zealand Superannuation Fund. It is understood Shell is using the same adviser – Bank of America Merrill Lynch – for the Australian process.

Any sale by Shell would be closely watched by Coles, whose co-branded services stations account for 24 per cent of retail petrol sales.

Industry sources said a new buyer would have to renegotiate Shell’s existing supply and lease agreements with Coles, pointing out that these types of deals usually have a change of control clause. Coles buys oil from Shell wholesale then sells it through the outlets it leases from Shell.

The supermarket group could opt to stick with Shell as a supplier rather than striking a new deal but any renegotiations would affect the price Shell might extract for the sale.

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