Essar likely to buy Shell's refinery for $350 mn

Ruias-owned Essar Group is likely to buy Royal Dutch Shell's Stanlow refinery in the United Kingdom for about $350 million.

Sources in know of the development said a preliminary announcement of Essar and Shell being in exclusivity dialogue on the transaction is likely to be made this week.

Stanlow is the UK's second-biggest refinery with a capacity to process 233,000 barrels of crude oil per day.

When contacted, an Essar spokesperson said: "Essar can confirm that it is still in talks with Shell for the purchase of its Stanlow refinery and associated marketing business. Talks are progressing but we cannot comment on details or timelines."

Essar Oil Managing Director and CEO Naresh K Nayyar had last month stated that his firm has "re-engaged" in discussions to buy Shell's Stanlow refinery in northwest England.

Previously, it was in talks to buy not just Stanlow but also Shell's Heide and Hamburg units in Germany. It was not clear if Essar has dropped plans to buy Heide and Hamburg or Shell has rejected its bid for the two plants.

Essar first evinced interest in buying Shell's three refineries in 2009 and talks broke down last year.

The three refineries have a combined capacity of around 23 million tonne and the acquisition was part of Essar's vision to have one million barrels of refining capacity.

The Shell's plant at Hamburg in Germany has a capacity of 110,000 bpd and the refinery at Heide can process 91,000 barrels.

Media reports had valued the three refineries at 1-1.5 billion pounds ($2.48 billion).

Shell, based in The Hague, is reducing its involvement in refining, especially in Europe, to invest more money upstream in more lucrative oil and gas production.

Essar Oil operates a 14 million tonne a year refinery at Vadinar in Gujarat, which it plans to expand to 20 million tonne by September 2012.

It had in 2008 acquired 50% stake of Kenya Petroleum Refineries which operates 4 million tonne a year refinery at Mombasa.

Products from the Mombasa refinery, in which the Kenya government has a 50% stake, are sold in the Kenyan market and exported to neighbouring countries, including Tanzania, Uganda, Burundi and Rwanda.