Nov. 3 (Bloomberg) -- Royal Dutch Shell Plc is in talks to sell its New Zealand fuel distribution assets and a $154 million stake in the nation’s only oil refinery as part of a global focus on exploration and production.

Exclusive negotiations are under way with Infratil Ltd., a New Zealand investor in airports and power companies, and the New Zealand Superannuation Fund, Shell said in an e-mailed statement today. The talks, which exclude Shell’s New Zealand oil and gas fields, may be completed within the next month, Jackie Maitland, a spokeswoman, said in the statement.

Europe’s biggest oil company hired UBS AG in May to seek a buyer for the New Zealand downstream assets, including a stake in New Zealand Refining Co., which has a total market value of NZ$1.26 billion ($900 million). Other assets under discussion include 229 filling stations, port terminals and fuel facilities at Auckland and Christchurch airports.

“The big multinationals are just not seeing downstream as a core part of their business,” said John Kidd, who follows the industry at McDouall Stuart Securities Ltd. in Wellington. “There’s potential for quite some shuffling of the register” as other refinery shareholders review their positions, he said.

Infratil fell 5 cents, or 3 percent, to NZ$1.60 at 2:59 p.m. in Wellington. New Zealand Refining was unchanged at NZ$5.20. The stock has fallen 25 percent since the company suspended dividends on Aug. 18 and warned of a second-half loss amid a slump in global refining margins.

Conditional offer

Infratil and the New Zealand Superannuation Fund, a NZ$15.2 billion government agency formed to help meet the nation’s long- term pension commitments, have submitted a conditional offer to Shell, based in The Hague, and are in the final stages of due diligence, the Wellington-based company said in a statement.

The transaction includes, but isn’t limited to Shell’s 17.1 percent stake in the refinery, its New Zealand supply and distribution infrastructure and its retail fuel interests, Infratil said. A sale isn’t guaranteed, Shell’s Maitland said.

New Zealand Refining operates the nation’s only oil processor and is controlled by the local units of Shell, Exxon Mobil Corp., BP Plc and Chevron Corp. Toronto-based Garlow Management Inc. also holds a 13 percent stake on behalf of a family trust.

Irving, Texas-based Exxon hired Goldman Sachs JBWere Ltd. to find a buyer for its 19 percent stake and 183 New Zealand filling stations, New Zealand’s Independent newspaper reported in July.

Deal Structure

Exxon’s process has been “quite opaque” and it’s impossible to know if Infratil’s transaction will include that stake, McDouall’s Kidd said.

It’s also unclear whether the retail assets will be retained or another party brought into the New Zealand market to manage them, he said. Shell’s filling station network was the second largest in the country, behind BP, according to a 2008 report by consultants Hale & Twomey.

“All sorts of permutations could come from this,” he said.

The refinery, at Marsden Point, started in 1964 and last year handled about 107,000 barrels a day. It makes 70 percent of the country’s fuel and will this year complete a NZ$180 million upgrade to increase output by 15 percent, with most of the gain in diesel and jet fuel.

Shell is reviewing the future of its refineries worldwide as it seeks to reduce costs and cut spending after the global recession curbed demand for fuels and dragged down prices. Declining profit margins have prompted refiners to idle plants, seek the sale of others and slow operating rates.

Shell said Oct. 30 it is in exclusive talks with Essar Oil Ltd. over the sale of three refineries in the U.K. and Germany. Shell said last week it doesn’t expect profit from processing crude to rise in the “near term.”

“New Zealand Refining is the same,” Kidd said. “They are a price-taker” and Shell is unlikely to extract any material premium the sale, he said.

To contact the reporter on this story: Gavin Evans in Wellington at gavinevans@bloomberg.net

Last Updated: November 2, 2009 21:10 EST