Indian conglomerate Essar Energy has offered $350 million to buy Shells refinery in Stanlow, United Kingdom, including its API Group I base oil plant. The acquisition is expected to be completed during the second half of 2011.
Under the agreements terms, payment for the refinery will be made in two stages, with $175 million payable on completion of the acquisition, and a deferred payment of $175 million plus interest payable on the date of the first anniversary of the acquisitions completion. The companies signed an exclusivity agreement until April 1, under which break fees would be payable if either failed to sign an asset sales agreement.
Essar said it will also make a separate payment – currently estimated at $780 million – for the crude oil, refined products and certain other inventory on the Stanlow refinery site once the acquisition completes.
Base oil capacity at the Stanlow plant is 5,060 b/d of Group I. The base oil plant is included in the assets were buying, Essar Energy spokesman Andrew Turpin told Lube Report. The base oil will be sold back to Shell. Turpin said the company is not yet disclosing how long Essar would sell base oil back to Shell, because the deal is not yet completed.
A Shell spokesperson also confirmed to Lube Report that the base oil plant is included in the sale. The offer does not include the lubricant oils blending plant and does not impact the finished lubricants, process oils, base oils and waxes we sell, the Shell spokesperson stated. The UK is a very important market, and Shell Lubricants products will continue to be marketed in the United Kingdom.
Under the deal, Essar Oil UK will also enter into a number of long-term agreements for supply of refined products from the Stanlow refinery with Shell for durations of up to 10 years, depending on the product supplied. The products supplied are expected to account for 50 to 60 percent of the refinerys total output.
Essar will also enter into various other product offtake agreements with Shell to supply it with various chemical products. Essar will also operate and maintain the Shell higher olefins plant, alcohols unit and ethylene pipeline, which are to be retained by Shell.
Stephen Ames, principal of SBA Consulting, Pepper Pike, Ohio, noted that this sale follows a pattern seen at other Group I base oil plants in recent years. Examples include Sunocos plant in Tulsa, Okla.; ExxonMobils plant in Dunkerque, France; and Shells former Petit-Couronne, France, facility. What youre finding is theyre sold by major oil companies to independents and private equity firms who are not even in the lubricants business. So that has another impact.
Ames pointed out that Shells higher olefins unit, which Essar will operate after the acquisition completes, makes linear alpha olefins that can be used as the feedstock for polyalphaolefins (PAO).