Royal Dutch Shell shares took a knock after the report that its Nigeria business was weakening on heightened security concerns (Reuters)
Royal Dutch Shell is finally disposing its downstream assets in Australia with the reported sale of its Geelong refinery and petrol stations in the country for $2.4 billion. Newspapers identified the buyer as oil trader Vitol and Abu Dhabi Investment Commission.
Their consortium won over another joint venture between Macquarie Capital and Glencore Xstrata. A third company, private equity investment firm TPG is reportedly interested but is out of the sale process.
While Dutch-owned Vitol is in trading, it would keep the refinery open instead of converting it into an import terminal because of the high cost associated with the conversion, opined IG Markets strategist Evan Lucas.
YouTube/Vitol Group of Companies
Shell plans to offload up to $15 billion of its global assets in the next two years under the leadership of CEO Ben van Beurden. In 2011, Shell sold all its petrol stations in New Zealand. In January, it sold to the Kuwaiti Petroleum Exploration Company for $1.3 billion its 6.4 per cent stake in the Wheatstone liquefied natural gas assets and 8 per cent equity interest in the Wheatstone-lago gas field.
But the Geelong Advertiser said any sale that would result in the refinery shutting down would come under scrutiny of Australian regulators in view of the looming death of the Australian car industry and the planned closure of Alcoa's Point Henry aluminium smelter facility because of its impact on unemployment in Victoria. The potential problem with the Foreign Investment Review Board comes from the fact that one of the bidders, the Macquarie/Glencore JV, plans to keep the Geelong refinery running.
Shell has been trying to sell the refinery because of its high cost of operation and larger but cheaper competition for Asian refineries.