Shell sells Malaysian arm to Chinese firm

A Shell petrol station in Sabah, Malaysia. Source: Wikimedia

Royal Dutch Shell said it had agreed to sell its shares in Shell Refining Company in Malaysia to a private Chinese refiner for US$66.3 million.

It is the first overseas refinery acquisition by a private Chinese refiner, shortly after China allowed many of its small, independent oil plants to import crude for the first time.

Shell would sell the 51-per-cent stake to Malaysia Hengyuan International, while the remaining shares were held by institutional and public shareholders, a Shell spokesman said.

Malaysia Hengyuan International is a subsidiary of China’s Shandong Hengyuan Petrochemical Company.

The transaction was expected to be completed this year, subject to regulatory approval, Shell said.

A year ago Shell announced it was considering the sale of loss-making Shell Refining Company.

Trading would continue to supply its retail and commercial customers in Malaysia and honour its existing commitments which include a long-term off-take deal from Shell Refining Company, Shell said.

The multinational announced: “Malaysia continues to be an important country for Shell. Shell is the leading retail fuels and lubricants provider and continues to invest in growing these businesses in the country.

“It is [Malaysia Hengyuan’s] intention for Shell Refining Company to invest in the upgrades needed to meet the Euro 4M and Euro 5 requirements,” the company explained, referring to cleaner fuel specifications.

Shell Refining Company supplies Shell’s downstream businesses in Malaysia.

The oil refinery at Port Dickson has a capacity of around 156,000 barrels-per-day with 90 per cent of its oil products consumed domestically.

Shell has considered selling the Port Dickson refinery or converting it to a storage terminal. “The sale is consistent with Shell’s strategy to concentrate its global downstream footprint and businesses where it can be most competitive,” the fuel giant announced.

Shell said earlier this month that it could further cut combined capital investments below the US$33 billion targeted for this year.

Its asset sales during the past two years exceed US$20 billion, outstripping its original plan to make US$15 billion worth of divestments.

It said other recent downstream divestments include the sale of downstream businesses in Australia and Italy; a number of retail sites in the UK; and the initial public offering of, and further drop downs to Shell Midstream Partners LP.

Shell has also agreed to the sale of its marketing business in Denmark and Norway, its liquefied petroleum gas businesses in France and a 33.24 per cent shareholding in Showa Shell Sekiyu KK.

Shell has also sold businesses in Australia and Italy, a number of retail UK sites and the initial public offering of Shell Midstream Partners LP.