Shell Shortlists Paralubes Suitors


Shell Oil Products US has winnowed to three the field of potential buyers of its stake in the Excel Paralubes base oil business, according to sources familiar with the process.

The companies on the list submitted bids ahead of a deadline that had been set two weeks ago by Salomon Smith Barney, the New York financial services firm managing the sale, according to the sources, who spoke on condition that they not be identified. Shell is expected to make a decision within the next several weeks.

Days or weeks, one source said. It could happen any time now.

What will happen next is that [Shell or Salomon Smith Barney] will select the winning bid, or else [they] may say, Guys, would you like to bid again? a second source said. That should happen by May.

Excel Paralubes produces Group II paraffinic base oils at a Westlake, La., refinery built in 1996 as a 50-50 joint venture between Conoco, now ConocoPhillips, and Pennzoil, which later merged with Quaker State. Shell obtained the Pennzoil-Quaker State share when it bought the automotive consumer products marketer last year, but agreed to sell that stake in order to gain U.S. Federal Trade Commission approval for the merger.

The commission requested the divestiture because of concerns that, without it, Shell would control too much of the Group II capacity in the United States. Excel Paralubes is the second-biggest base oil refinery in North America, with capacity to produce 21,300 barrels per day. Shell is also a 50-percent owner and managing partner in Motiva, a joint venture with Saudi Refining Inc. that owns a 22,000 b/d Group II refinery at Port Arthur, Texas.

Shell and the commission entered a settlement that gave the company a year from Oct. 1, 2002 to sell its stake. If a sale has not been completed by the end of that period, the commission may appoint a trustee to conduct the sale. In the meantime, a trustee has been managing Shells part of the business.

The settlement also requires Shell to seek the commissions approval of the purchaser, and most observers agree that precludes any existing major paraffinic supplier. Sources said they would not expect the commission to object to any of the companies on the short list, even though some of them are already supplying base oils in the United States

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