Essar Oil reopens talks with Shell refineries

Essar Oil today said it has "re-engaged" in discussions to buy Royal Dutch Shell Plc's three European refineries but refused to put a timeline for conclusion of the deal.

"We have re-engaged" to buy Shell's Stanlow refinery in northwest England and the Heide and Hamburg units in Germany," Essar Oil Managing Director and CEO Naresh Nayyar said in a conference call.

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

Nayyar refused to put a timeline for conclusion of dialogue with Shell. "We are in discussions. Beyond that I cannot give further details on timelines."

The three refineries have a combined capacity of around 23 million tonnes and the acquisition, if successful, is part of Essar's vision to have 1 million barrels of refining capacity.

The refinery at Stanlow, Britain's second-largest processing plant, can process 233,000 barrels a day. Shell's plant at Hamburg in Germany has a capacity of 1,10,000 bpd and the refinery at Heide can process 91,000 barrels.

Media reports have 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 tonnes refinery at Vadinar in Gujarat, which it plans to expand to 20 million tonnes by September 2012.

It had in 2008 acquired 50 per cent stake of Kenya Petroleum Refineries with operates a four million tonnes a year refinery at Mombasa.

Nayyar said the proposal to revamp the Mombasa refinery is pending with the board of KPRL.

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

Demand for petroleum products in these markets is estimated at 5 million tonnes per annum.