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Energy investment company Infratil Ltd, in consortium with the Guardians of New Zealand Superannuation Fund, have announced that a letter of intent has been signed relating to the potential acquisition of Shell New Zealand’s refining and downstream businesses, which includes the company's marine fuel operations.

The letter was signed by Shell’s country chairman for New Zealand Rob Jager, Infratil’s Chairman David Newman and Guardians’ Chair David May.

In a joint statement Infratil and New Zealand Superannuation Fund said the letter of intent is not an acquisition contract.

"However it does represent Infratil and the Guardians’ clear intention to proceed to acquire Shell’s New Zealand downstream assets if relevant pre-requisites are met including the securing of third-party approvals," the statement said.

According to sources a price has been agreed by the parties involved but there would be no announcement on price until the deal had been signed. Market speculation has valued Shell's assets at between $700 million and $1 billion.

Infratil said previously the scope of the proposed transaction includes but is not limited to a 17.1% stake in the New Zealand Refining Company, Shell New Zealand’s supply and distribution infrastructure and it’s retail and B2B fuel business.

Shell announced in February 2009 that it had begun a strategic review to study the long-term ownership options of its downstream businesses in New Zealand.

Shell New Zealand Holding Company Limited holds 17.14 percent (41,142,840 shares) in the publicly-listed New Zealand Refining Company Ltd., which owns and operates the Marsden Point refinery.

New Zealand Refining Company's 240 million shares are also held by BP, Exxon Mobil, Chevron, Emerald Capital, as well as approximately 3,000 private and institutional investors.

Each of the four oil majors has processing rights to a share of the refinery's capacity. This is calculated on the basis of their average market share over the preceeding three years. The theoretical effect of this is that the refinery is run as if it were four small refineries, with each company selecting and supplying its own crude diet and setting its own product output.

With their shared access to the country's sole refinery, the four majors have dominated the New Zealand oil and bunker markets for number of years, although there was a brief challenge in the late 1990s from Fletcher Challenge Energy. The company's oil and gas operations were acquired by Shell in March 2001 and its wholesale fuels business was purchased by Caltex.

Infratil is an owner and operator of businesses in the energy (mainly renewable), airport and public transport sectors. Its energy operations are predominantly in New Zealand and Australia. The company owns Wellington Airport in New Zealand and airports in Glasgow, Kent and Lübeck. Infratil’s public transport services are in Auckland and Wellington, New Zealand.

Background on Shell Downstream assets:

* 17.1% of listed company NZ Refining

* Access to refinery and pipeline capacity

* Ownership/access arrangements to joint national distribution network, including 13 nationwide terminals and shipping infrastructure

* 25% ownership of Loyalty New Zealand (FlyBuys) sales and distribution network including:

229 retail outlets

95 truck stops

Facilities at Auckland and Christchurch airports