Vitol Group agreed to pay about A$2.9 billion ($2.6 billion) for Royal Dutch Shell Plc’s Australian refinery and filling stations as Europe’s largest oil company accelerates asset sales.
The acquisition includes the Geelong oil refinery south of Melbourne and its 870-site retail business, The Hague-based Shell’s Australian unit said today in a statement. It doesn’t include the aviation-fuel business.
Vitol, the biggest independent oil trader, will keep the refinery operating and plans to expand the Australian business as the economy grows, the Geneva-based company said. Shell Chief Executive Officer Ben van Beurden, who took over this year, is stepping up asset sales after weak margins from refining and unprofitable shale investments in North America cut earnings.
“Vitol believes they can source product more efficiently than the rest of the Australian market as highly competent traders,” Mark Samter, a Sydney-based energy analyst at Credit Suisse Group AG, said today by phone. Whether Vitol can make the refinery profitable “remains to be seen,” he said.
Shell said it has also recently agreed to sell refineries in the U.K., France, Norway, the Czech Republic and Germany, and plans to sell more operations in Norway and Italy.
Vitol will continue to sell gasoline under the Shell brand in Australia as part of the deal, which also includes bitumen, chemicals and lubricant assets, according to the statement.
Shell plans to sell about $15 billion in assets through 2015 and has already announced deals in Australia, Brazil and Italy this year. It has been examining plans to dispose of its $6.6 billion stake in Woodside Petroleum Ltd., Australia’s second-largest oil and gas producer.
“The speed at which Shell can sell relatively immaterial assets for billions of dollars highlights how unambitious its $15 billion program is,” Investec Bank Plc wrote in a note. “We would expect the disposal target to be raised in due course.”
The sale follows Vitol’s 2011 agreement to buy the bulk of Shell’s downstream business in 14 African countries, alongside Africa-focused private-equity firm Helios Investment Partners LLP, for about $1 billion. The Swiss company owns refineries in the United Arab Emirates, Switzerland and Belgium with a capacity of about 150,000 barrels a day, its website shows.
Vitol is playing catch-up in Australia to Puma Energy, whose largest shareholder is commodity trader Trafigura Beheer BV. Puma made three acquisitions in the country last year including a deal to become the nation’s largest independent fuel retailer with the purchase of Ausfuel.
“We accept that the global environment is challenging,” Vitol CEO Ian Taylor said today in a news conference in Melbourne. “We can make this refinery profitable.”
Shell’s investments in upstream energy, or exploration and production, won’t be affected, according to its statement.
“Australia remains important to Shell, but we are making tough portfolio choices to improve the company’s overall competitiveness,” van Beurden said.
The company plans to invest about $30 billion in natural-gas exploration and production in Australia to meet rising Asian demand. The company is a partner in Chevron Corp.’s Gorgon gas-export project off northwest Australia and Woodside Petroleum’s proposed Browse liquefied natural gas venture. It’s also developing the Prelude floating LNG project.
Shell’s Australian unit said in April last year it would sell the Geelong refinery to focus on larger plants, such as the Pulau Bukom refinery in Singapore. The Geelong facility processes about 120,000 barrels of oil a day, it said.
Refiners in Australia, including Shell and Caltex Australia Ltd., are closing processing operations amid competition from larger facilities in Asia such as Reliance Industries Ltd.’s Jamnagar plant in India, the world’s biggest refining complex.