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Essar-Shell deal by Nov 30

Ruias-promoted Essar Oil is giving finishing touches to a deal for purchasing Royal Dutch Shell’s stake in three refineries in Europe, reports Anupama Airy.

business Updated: Nov 23, 2009 21:12 IST
Anupama Airy

Ruias-promoted Essar Oil is giving finishing touches to a deal for purchasing Royal Dutch Shell’s stake in three refineries in Europe.

The deal, for which exclusive talks between the two companies ends on November 30, entails an investment of anywhere upto $1 billion (Rs 4,650 crore) by Essar Oil in picking up Shell’s equity stake in two refineries in Germany and one in U.K.

Also part of this deal is an offer where Shell may pick up 10 to 15 per cent stake in Essar’s Jamnagar refinery in Gujarat for around Rs 1,700 crore to Rs 2,500 crore. Shell is being advised on the sale of the three refineries by Lazard.

An announcement on the deal is expected to be made by the end of this week, a source close to the development said.

When contacted in London, Shell spokesperson Sally Heppon said, “We do not comment on the ongoing negotiations.” Essar Oil’s spokesperson also denied any official comments on the deal.

“Essar has entered into an exclusive negotiation with Shell for buying Shell’s Refinery at Stanlow in UK and Heide and Harburg in Germany. Negotiations are on and we cannot comment any further on the matter”

“The exclusivity period for talks between Essar and Shell ends on November 30 and if an agreement is reached, it will be announced by end of this week,” a source close to Essar Oil said.

Under the restructuring plan worked out in the backdrop of the continuous fall in refining margins, Shell has decided to sell 15 per cent of its global refining capacity or around 600,000 barrels per day.

Essar is currently operating a refinery with a capacity of 270,000 barrels per day and is expected to increase its refining capacity to 385,000 barrels per day.

Essar global subsidiary, Essar Energy has recently purchased a 50 percent stake from Shell, BP and Chevron, in the Mombasa based Kenya Petroleum Refineries Ltd, with a capacity of 80,000 bpd. The remaining 50 percent stake in the Kenya refinery is held by the Kenyan government.