Royal Dutch Shell has agreed to sell its downstream Australian assets - including the
Geelong refinery and petrol stations - to oil trading giant
Vitol and the
Abu Dhabi Investment Council (ADIC) for approximately A$2.4 billion (US$2.17 billion), The Australian reported on Wednesday.
The sale would appear to be in line with Shell's overall strategy of selling downstream assets to focus on its main business of energy exploration, development and production.
In 2012, Shell ceased refining operations at its 79,000 barrel Clyde Refinery in Australia. Speaking at the time, Shell Australia Downstream Vice President, Andrew Smith, said the decision was "consistent with Shell’s strategy to focus its refining portfolio on larger assets and to build a profitable downstream business here in Australia. Since the decision was taken, the refinery has continued to struggle against sustained poor industry margins and intense competition from mega-refineries in Asia."
Over the last four years, Shell has also sold downstream assets in a number of locations including Chile, Gibraltar, New Zealand, Egypt, Finland and Sweden.
Last year, during the sale of its retail and commercial fuels activities in Egypt to French oil firm
Total, Shell said: "The sale is consistent with Shell’s strategy to concentrate its downstream footprint on a smaller number of assets and markets. Recent examples include the sale of refineries in the UK and Germany and downstream businesses in Finland and Sweden as well as the establishment of joint ventures in Brazil and across much of the rest of Africa."
The sale of the 130,000-barrel-per-day (bpd) Geelong refinery looks set to also have repercussions on the Melbourne bunker market. The port is supported by the Geelong refinery in addition to ExxonMobil's 75,000 bpd Altona refinery. Both local refiners have also been supplying marine fuels and lubricants directly to clients in Melbourne.
The Geelong plant has been on the market since around April last year, with the sale subsequently broadened to include Shell's petrol stations in Australia.
According to industry sources, Vitol plans to shut down the Geelong refinery, which would make Australia more dependent on the trading firm's oil supply base in the Middle East. It would also mean that there would only be one local refinery supplying the Melbourne bunker market.
It is understood that the Vitol-ADIC consortium came out on top over a group comprising
Macquarie Capital and miner-trader
Glencore Xstrata.
The reported sale price of US$2.17 billion is below
Deutsche Bank's reported valuation of US$2.4 billion.
Shell is being advised by
Bank of America Merrill Lynch.
