Essar Energy Holding Ltd is not keen to acquire the three European refineries of Royal Dutch Shell Plc any more, and the company is dragging its feet on the deal, a company official said on Tuesday.
Negotiations for the refineries had begun in October last year.
“Essar is not very keen on the (Shell) assets. They have been driving a hard bargain, and intend to get out of the deal. Shell may look for other buyers but the environment is not very good for such deals. They have already agreed to sell the Heide unit,” the source said.
The Ruia-promoted Essar group entity is the promoter of India-listed Essar Oil Ltd.
Shell, on the other hand, has struck a deal with private equity fund Klesch & Co to sell the Heide refinery, and the fate of other refineries is likely to be the same, the Essar official said.
According to a release dated August 20 on Klesch’s website,
Shell and the fund have entered into a binding agreement for the sale of the 4.5-million-tonne Heide refinery, along with associated chemicals, bitumen and distribution infrastructure and related marketing businesses.
Financial details of the deal were not provided.
Shell’s Stanlow refinery in the UK in has capacity of 272,000 barrels per day, and its two German refineries have a combined capacity of around 200,000 barrels a day.
According to sources, Shell had set a total price of around $2.5 billion for the three refineries.
Both Shell and Essar officially maintain the negotiations are still on.
Shell, last week, had said it is still in non-exclusive talks with Essar for the two remaining refineries in Europe.
“A deal is still possible but chances are remote. For Essar, priorities have changed,” the Essar official said.
In a conference call last week, Essar Energy vice-chairman Prashant Ruia had said the talks are still continuing but added that the focus is on the India market.
An Essar Energy spokesperson on Tuesday reiterated the company is still in talks with Shell. “Essar can confirm that it is still in talks around the possible sale and purchase of Shell’s European refineries. Discussions are ongoing at this stage. We will not comment on the detail, including timelines,” the spokesperson said.
“Our stated strategy is to create a low cost, integrated energy company to capitalise on India’s rapidly growing energy demand...We will look outside of India as well, but only where this supports our core strategy and delivers value to our shareholders... We want to be very clear with our stakeholders on the type of opportunities that we would look at, but again, the focus is on India,” Ruia had said last week.
Essar Energy Holdings had initiated preliminary talks with Shell to buy three of its refineries—at Stanlow in UK and Heide and Harburg in Germany—in October-end and the exclusivity of the talks was extended twice after that. The exclusivity elapsed earlier this year but talks continued. The talks also included Shell’s local marketing, but not retail, operations.
Shell has chalked out plans to sell 15%, or about 600,000 barrels a day, of its global refining capacity, over the next three years as part of a restructuring to increase profitability and efficiency but has not met with much success.
NewsWire18
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