Sponsored by: Investment Center

Something new in your business?  Click here to submit your business press release

Chamber Corner | Main Street News | Job Hunt | Classifieds | Calendar | Illinois Lottery 

Vitol pays $2.6 billion for Shell's Australian refinery, petrol stations

Send a link to a friend  Share

[February 21, 2014]  By Byron Kaye and Cezary Podkul

SYDNEY / NEW YORK (Reuters)  Vitol SA <VITOLV.UL> is buying Royal Dutch Shell's <RDSa.L> Australian downstream businesses for about A$2.9 billion ($2.6 billion) in its biggest acquisition, as the oil trader looks to grab a share of the country's lucrative oil product market.

The purchase, which includes a refinery and 870 service stations plus Shell's bulk fuels, bitumen and chemicals businesses, will pit Swiss-based Vitol against rival Trafigura Beheer <TRAFG.UL>, which became Australia's largest independent fuel retailer last year.

Australia has become one of Asia's biggest fuel importers as oil majors have shut older refineries and turned away from the relatively small market in favor of higher yielding opportunities elsewhere.

Shell, attempting to win round investors after a major profit warning early this year, said in January it was targeting $15 billion of disposals over the next two years as it tries to deliver more attractive returns to shareholders.

"(Vitol) can provide the inputs, supply these activities, (run) these downstream activities efficiently, and they can make a return on them that is satisfactory for them but that is not sufficient for a company like Shell," said Craig Pirrong, Professor of Finance at University of Houston.

"These two companies have different return expectations and targets they're willing to accept."


A Vitol spokeswoman confirmed that the Abu Dhabi Investment Council sovereign fund was part of the group which bought the assets.

Dutch-owned Vitol entered the race for the Australian petrol stations after Trafigura's Puma Energy arm bought two fuel distributors.

Others eyeing the market include South Korean refiner S-Oil <010950.KS>, which said last month it was in exclusive talks to buy a stake in Australia's United Petroleum, a privately owned business valued at about A$1 billion, including debt, that received a number of approaches from international companies following Puma's takeover of Ausfuel.

"Australia is a growing economy and we look forward to working with the management team to strengthen and grow the business," Vitol President and CEO Ian Taylor said in a statement.

Australia's refineries, owned by Shell, BP <BP.L>, ExxonMobil <XOM.N> and Caltex <CTX.AX>, have mostly booked losses over the past several years as tighter fuel quality standards and mega refineries in Asia have made them uncompetitive.

Rather than spend money on upgrading their plants, the majors have been looking to sell them or turn them into fuel import terminals.

That has created an opportunity for the giant oil traders looking to expand their oil products market share and grow volumes in face of competition from local trading firms in big markets like Indonesia and Vietnam.

Taylor told reporters that Vitol intended to run the Geelong refinery in Victoria state "as a successful profitable refinery".

[to top of second column]

SHELL SELL-OFF CONTINUES

Shell, which retains substantial gas interests in Australia as well as a $7 billion stake in Woodside Petroleum <WPL.AX>, was making tough portfolio choices to improve its overall competitiveness, Chief Executive Ben van Beurden said in a statement.

It has already sold downstream assets including refineries in the UK, Germany, France, Norway and the Czech Republic and downstream businesses in Egypt, Spain, Greece, Finland and Sweden.

"The new (Shell) management is being ruthless in cutting out anything that they think is extraneous to their core," said Al Troner, President of Asia Pacific Energy Consulting in Houston, Texas.

"Australia is a big, continental country, but in terms of its oil demand, it's a mid-size Asia Pacific country. Shell has been doing its calculations and basically they came to the conclusion 'should I stay or should I go?'"

Most of Shell's refining and distribution staff will continue to operate the Australian business and the Shell branding would remain under its new owner, Shell said.

The sale includes a brand license arrangement and a distributor arrangement for Shell Lubricants but not Shell's oil and gas producing operations, the companies said.

($1 = 1.1134 Australian dollars)

(Additional reporting by Florence Tan; editing by Richard Pullin)

[ 2014 Thomson Reuters. All rights reserved.]

Copyright 2014 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

< Recent articles

Back to top