Shell to Sell Refining Assets in Europe, Records 70% Drop in Net Profits for Q2

---

Researched by Industrial Info Resources (Sugar Land, Texas)--Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) has announced plans to sell about 8% of its refining assets in 2009-10 because of declining demand and oversupply in the market. The company reported a 70% drop in net profits for the second quarter. According to Peter Voser, Chief Executive of Shell, the company plans to sell its refining assets at Heide and Hamburg in Germany, and its service stations in Greece and in other nations.

Recently, the company announced the sale of its Stanlow refinery in the United Kingdom. Shell intends to reduce its refining capacity by about 330,000 barrels per day (BBL/d) and instead focus on large, modern facilities in markets that promise high growth at lower costs. According to reports, the company hopes to complete sales of about $2.51 billion. If the company fails to sell the refineries, Shell may consider converting the units into distribution and storage terminals.

The Stanlow Manufacturing Complex, near the Ellesmere Port in Cheshire, houses the second-largest oil refinery in Britain. The facility processes about 12 million tons per year of crude oil, most of which is sourced from the North Sea. The main units include a crude distillation unit, a vacuum distillation unit, a fluid catalytic cracker, a catalytic reformer, hydro-desulfurization units, and liquefied petroleum gas (LPG) facilities. The refinery produces a wide range of products, such as 3 million tons per year of petrol, 3.5 million tons per year of diesel, 2 million tons per year of kerosene/jet fuel, about 1.5 million tons per year of LPG and petrochemical feedstock, and 1 million ton per year of fuel oil. Tankers transport crude oil to the Tranmere oil terminal on the south bank of the Mersey River; a pipeline is then used to pump the oil to the storage tanks at the refinery site. While about 20% of the products leave the refinery through the Manchester Ship Canal, 50% is transported via road and 30% by pipeline.

Shell's refineries at Heide and Hamburg-Harburg in Germany have oil-processing capacities of 4.5 million tons per year and 4.6 million tons per year, respectively.

During its annual strategy review in March, Shell announced it would continue to build new upstream and downstream capacity and at the same time manage the near-term challenges presented by the global economy. The company intends to invest $31 billion to $32 billion this year to create an industry-leading portfolio. The major investment plans already under way include efforts to increase the company's LPG production 40% to reach 6.5 million tons per year; increase refining and gas-to-liquid assets about 7% within 2011-12; enter new growth areas in the fuel and lubricant markets; and increase production of ethylene by 13% and of mono-ethylene glycol by more than 60%.

India's Essar Group (Jamnagar, Gujarat), Libya's National Oil Corporation (NOC) (Tripoli, Libya), Valero Engineering Corporation (NYSE:VLO) (San Antonio, Texas), and an investment vehicle that is controlled by the royal family of Saudi Arabia are all making a bid for Shell's Stanlow refinery. While Essar and NOC are confirmed bidders, the other two parties have not made official announcements about their bids. International financial advisory and asset management firm Lazard Limited (NYSE:LAZ) (Hamilton, Bermuda) is managing the auction, and final bids are due August 17.

Industrial Info Resources (IIR) is the leading provider of global market intelligence specializing in the industrial process, heavy manufacturing and energy related markets. For more than 26 years, Industrial Info has provided plant and project opportunity databases, market forecasts, high resolution maps, and daily industry news.