Shell decides to permanently close Montreal refinery

04 June 2010 19:40  [Source: ICIS news]

TORONTO (ICIS news)--Shell will permanently close its 130,000 bbl/day Montreal refinery in Canada’s Quebec province after an 11-month effort to sell the facility failed, the company said on Friday.

The refinery, which employs some 500 workers, would be converted into a fuel terminal, it said.

The decision came after “considerable effort” to sell the refinery, including an initiative supported by the Quebec provincial government to identify potential buyers, it said.

Although this latter effort resulted in two expressions of interest, there was a “significant valuation gap” and Shell would no longer pursue discussions with the interested parties, it said.

“Today's announcement reflects our strategy to divest non-core assets, while making selective investments to enhance Shell's competitive position," said Shell downstream director Mark Williams.

"Although we will be closing the refinery, conversion to a terminal will ensure we continue to supply the Montreal market with Shell's innovative products,” he added.

A Shell spokesman told ICIS news this week the refinery was scheduled to stop production in September. Base oil and wax production stopped this week as previously planned, he said.

A Quebec government spokesman told media Thursday that the province may be willing to support a potential buyer. Media officials at the province’s economic development ministry were not immediately available for comment.

Radio-Canada, the Quebec arm of Canada’s state media group CBC, reported that industry observers now feared the Shell closure could affect the Suncor/Petro-Canada refinery in Montreal, with which Shell shared the cost of shipping in crude oil via pipeline from Portland, Maine.

According to Radio-Canada, analysts put the value of the Shell refinery at around $125m-$160m (€103m-€131m).

The Shell closure marks a further setback to Quebec’s petrochemicals and refining industry.

In 2008, Dow Chemical ended production at its Petromont olefins/polyolefins joint venture in Montreal.

In March 2009, Shell’s Canadian affiliate PTT Poly Canada said it would permanently close an unprofitable 95,000 tonne/year polytrimethylene terephthalate (PTT) plant in Montreal. That facility was later bought by Portugal’s IMATOSGIL GROUP, which planned to convert it to polyethylene terephthalate (PET) production.

Shell is also reviewing downstream operations in Germany, the UK and elsewhere, with two refineries in Germany likely to be sold or closed.

In Canada, Shell in 2008 cancelled plans for a possible grassroots refinery at Ontario's petrochemicals hub in Sarnia, and Irving Oil said last year it would not proceed with a proposed 300,000 bbl/day refinery project in the country’s eastern New Brunswick province.

Meanwhile, in the US refining industry, Valero recently sold a refinery in Delaware to Switzerland's Petroplus and Marathon Oil said it planned to sell a refinery in Minnesota to a group of investors.

($1 = €0.82)

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By: Stefan Baumgarten
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