Shell, Delek End Montreal Refinery Talks Without Sale
August 02 2010 - 4:56PM
Dow Jones News
A last-ditch effort to save Royal Dutch Shell PLC's (RDSA)
Montreal East refinery from closure was unsuccessful, Shell said,
after the company failed to come to terms with Delek US Holdings
Inc. (DK) over a potential sale.
Canadian politicians intervened in the fate of the 77-year-old
refinery when Shell announced plans early this year to covert it to
a fuel terminal after failing to find a buyer for the refinery last
year. The jobs of nearly 500 refinery workers will likely be lost
after the refinery is shut down.
Delek US, the U.S. downstream energy subsidiary of Delek Group
(DLKGF, DLEKG.TV), one of Israel's largest conglomerates, was the
only serious bidder for the refinery during a second sale process
that ended in June. At a parliamentary hearing, Shell and Delek
agreed to discuss a sale a second time.
Negotiations last week "once again reached an impasse, leading
both parties to terminate discussions," Shell said in a
release.
Shell had said it was willing to sell the 130,000-barrel-a-day
refinery for C$150 million to C$200 million, but that would be in
addition to the cost of needed upgrades and maintenance, which
executives at the companies estimated between C$600 million and
C$800 million.
Richard Oblath, vice president of Shell Canada's downstream
portfolio, told politicians during a hearing last month that
despite investing more than C$400 million in the Montreal East
refinery over several years, Shell was unable to make it
competitive against newer, more modern refineries.
"We must now direct our attention toward converting the refinery
into a terminal in a way that is safe and ensures that there is an
adequate supply of fuel for our customers in Quebec, Atlantic
Canada, and Eastern Ontario," Shell said in the release.
-By Edward Welsch, Dow Jones Newswires; 403-229-9095;
edward.welsch@dowjones.com
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