Essar offers Shell $1.3 billion for UK's Stanlow refinery

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Feb. 18--Essar Energy offered to purchase Royal Dutch Shell PLC’s 272,000 b/d Stanlow refinery and associated local marketing businesses in the UK for $1.3 billion, with closure expected by mid-2011.

In the wake of Essar’s offer, Shell said the two firms signed an exclusivity agreement until Apr. 1 2011, under which break fees would be payable if either company fails to sign an asset sales agreement.

“Pursuing this deal is aligned with Shell’s strategy to concentrate its global manufacturing portfolio on larger and more sophisticated assets,” Shell said.

In addition to the proposed sale of the assets, the two companies would enter into an exclusive 5-year crude supply contract by Shell to Essar and into long-term agreements for the supply of products in the UK by Essar to Shell.

Previously, Essar announced plans to invest $400 million to double the capacity of its Mombasa refinery to 80,000 b/d in anticipation of increased supplies coming from Uganda.

"After the discovery of oil reserves in Uganda, we are confident of crude oil supply and we shall be able to utilize the refinery optimally," said an Essar executive at the East Africa Petroleum Conference.

Contact Eric Watkins at hippalus@yahoo.com.



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