Essar Energy finally reached an agreement to buy Shells refinery in Stanlow, United Kingdom, the companies announced yesterday. The $350 million transaction includes an API Group I base oil plant with capacity to make 5,060 barrels per day.
The companies have been negotiating off and on for the past 19 months. Last month they announced that Essar had offered $350 million and that they would negotiate exclusively with each other until April 1.
Shell has divested several refineries in recent years as part of a strategy to concentrate on core, profitable operations. Since 2002 the Anglo-Dutch energy giant has reduced its global refining capacity by 1.6 million b/d. Stanlows total crude throughput capacity is 270,000 b/d.
Essar, an Indian conglomerate, wanted to expand its refining operations and to enter the European market.
We are very pleased to have agreed this transaction with Shell. Stanlow is a high quality refinery and is an excellent fit with our strategy, Chief Executive Officer Naresh Nayyar said. We look forward to taking ownership of Stanlow in due course and making operational improvements which will enhance production and better optimize the facility.
Although neither company mentioned the base oil plant yesterday, Essar said previously that it expected to enter a supply agreement to sellthe base stocks to Shell. Shell has said it will keep and plans to continue operating a lubricant blending plant at Stanlow.
Shell officials said the agreement is good news for employees of the refinery and the surrounding community.
This deal serves Stanlows future well, given Essars commitment to investment and intent to increase site throughputs, said Frank Willsdon, Stanlow general manager. It can only benefit staff, business partners and the local community and region. After our many years with Shell, we now look forward to a smooth transition and moving forward with Essar.