Shell to shed German refining assets

Varo Energy BV, a midstream company owned by The Carlyle Group and Vitol Group, has entered formal negotiations with Royal Dutch Shell PLC for the purchase of Shell’s 37.5% minority interest in PCK Raffinerie GMBH's 220,000-b/d refinery in Schwedt, Germany, located along Druzhba pipeline in Schwedt, Germany, about 120 km northeast of Berlin.

As of mid-December, advanced discussions regarding the potential transaction remained under way, the companies said in separate releases.

While neither Shell nor Varo Energy disclosed specific details of the proposed deal, the parties did confirm that, if completed, the transaction would help further each of the company’s strategic objectives.

For Varo Energy, acquisition of Shell’s shareholding in the refinery would enable a geographical expansion to northern and eastern parts of Germany to enhance its current downstream business and supply chain, according to the company, which also owns a 45% share in the 215,000-b/d Bayernoil refining complex near Ingolstadt, Germany (OGJ Online, July 1, 2014).

Alternatively, Shell said the proposed sale would further its strategy of focusing its downstream activity on other areas where the company feels it can be most competitive.

Should the companies complete the deal, Shell has agreed to work closely with Varo Energy to maintain ongoing commercial supply agreements with current customers, the companies said.

Alongside Shell subsidiary Shell Deutschland Oil GMBH 37.5%, stakeholders in the PCK Raffinerie consortium also include the OJSC Rosneft-BP PLC joint venture Ruhr Oel GMBH (ROG) 37.5% and Eni SPA 8.33%.

Following formal dissolution of the ROG JV, which is scheduled to take place by yearend, Rosneft’s shareholding in PCK Raffinerie will increase to 54.17% (OGJ Online, Feb. 12, 2016).

Shell’s downstream selloff

This latest proposed divestment joins Shell’s growing list of other recently announced and completed selloffs that company said aligns with its strategy to concentrate its downstream footprint on a smaller number of assets (OGJ Online, Dec. 19, 2016).

Alongside the finalized sale of nearly all its interest in Japanese refiner Showa Shell Sekiyu KK on Dec. 19, the Dutch operator’s downstream consolidation moves include:

• The pending $80-million sale of its Danish subsidiary AS Dansk Shell—including the 70,000-b/d Fredericia refinery, local trading and supply activities, as well as long-term purchase and sales agreements for refinery feedstocks and finished products—to Dansk Olieselskab APS in a deal that will end Shell’s downstream presence in Denmark (OGJ Online, Sept. 15, 2016).

• The imminent sale of its majority interest in Shell Refining Co. (FOM) Bhd., including the 125,000-b/d refinery in Port Dickson, Malaysia, to a subsidiary of China’s Shandong Hengyuan Petrochemical Co. Ltd., Shandong, by yearend (OGJ Online, Feb. 1, 2016).

• A recently inked deal to sell its Australian aviation fuels division for $250 million to Viva Energy Australia Pty. Ltd., which follows the 2014 sale of its other Australian refining and fuels businesses—including the 118,000-b/d Geelong refinery near Melbourne—to Viva for $2.9 billion (OGJ Online, Dec. 19, 2016).

• The sale of other downstream operations in the UK, Italy, Egypt, Spain, Greece, Finland, and Sweden (OGJ Online, Feb. 21, 2014).

Contact Robert Brelsford at rbrelsford@ogjonline.com.

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