FTC Seeks Info from Shell, Pennzoil-Quaker State


The U.S. Federal Trade Commission has requested additional information regarding Shell Oil Co.s proposed acquisition of Pennzoil-Quaker State Co., leaving open the possibility of regulators seeking concessions before the deal is completed.

Separately, Shell announced plans to form a global lubricants business within two years.

The trade commissions request was announced Monday by Pennzoil-Quaker State, which said that the agency wants more information about base oil and passenger car motor oil. The Independent Lubricant Manufacturers Association and individual blenders have raised concerns that the acquisition would give Shell control of38 percent of North Americas refining capacity for Group II base oils.

Observers said the commissions request was not surprising but that it is still difficult to predict whether the commission will set any conditions for its blessing of the acquisition.

This is not at all unusual, said Jeffrey Leiter, co-actingexecutive director for ILMA. Its typical in a transaction of this size that the commission would ask for some additional information. It doesnt necessarily mean that they will ask for anything and I dont think anyone can say whether they will.

Shell and Pennzoil-Quaker State submitted their deal to the commission in late April and a deadline was approaching for the agency to state whether it wanted more information. Lack of such a request would have allowed the companies to complete the transaction without divestitures or any other concessions. The companies have previously indicated that they did not expect such fast-track approval by stating that they expect to close the deal during the second half of this year.

Some observers have suggested that the base oil implications for Shells acquisition are similar to those posed by Exxons merger with Mobil two years ago. The trade commission convinced those companies to enter long-term contracts to sell 12,000 barrels per day of base oil to independent lubricant blenders. The outcome was contracts with Castrol, which was later bought by BP, and Pennzoil-Quaker State.

Other observers argue that the Shell-Pennzoil-Quaker State deal would help rather than hurt competition by establishing a second large U.S. base oil refiner to challenge ExxonMobils dominance.

The announcement about creation of a global lubricants business was part of an internal message circulated last week. It said that lubes will take on a worldwide structure similar to those in place for aviation and marine products. A spokesman said yesterday that details of that structure have yet to be fleshed out but that the concept reflected Shells growing emphasis on lubes.

Recent mergers in this industry have created stronger competition, said Rick Wirth, manager of marketing and external communications. A full review by our Oil Products leadership concluded that a focused strategy was necessary if we wanted to be a leading player.

The transition to a global structure will be led by David Pirret, who was appointed vice president of lubricants for Shell Oil Products, effective June 1. Pirret will also serve as Shells point man for the Pennzoil-Quaker State acquisition. Pirret is currently executive vice president of Shell International Petroleum Ltd., services company for Shell Global Oil Products.He will replace Allen Kirkley, who was named in March to head the U.S. lubricants business.

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