Essar Energy to snap up refinery

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One of the UK's biggest oil refineries is close to being sold

The UK’s second biggest oil refinery is close to being sold to India-focused energy giant Essar Energy.

Essar Energy, which is based in Mauritius and operates primarily in India, has signed an exclusivity agreement with the refinery’s owner Royal Dutch Shell in a deal that could see it pay up to 1.3 billion US dollars (£800 million) for the Stanlow site, near Ellesmere Port, Cheshire.

Both firms will be liable to pay charges if either backs away from the deal before April 1.

The acquisition would end uncertainty over the site’s future ownership, after Stanlow – which employs 960 staff and produces 272,000 barrels of oil a day – was put up for sale in 2009.

The sale, once completed, will mark London-listed Essar’s first footprint in the UK. It is set to pay 350 million US dollars (£219 million) for the plant and a further 780 million US dollars (£480 million) for crude oil, refined products and other stock on the Stanlow site.

Naresh Nayyar, Essar Energy’s chief executive, said: “We are very pleased to have reached an agreement regarding Stanlow, which is a high quality refinery in terms of its employees, its assets, its location and its customer base.”

He went on: “After completion, we look forward to working closely with the refinery management and employees to develop the business and we will be investing in operational improvements to optimise the facility and enhance production.”

Weak demand in European markets and over-capacity during the economic downturn has forced several refiners in Europe to sell their under-pressure refineries. But Essar said the Stanlow refinery was profitable, with margins up to 3 US dollars (£1.80) per barrel higher than the average European margin.

The company said the purchase of Stanlow, which will still be subject to shareholder and regulatory approval, will give Essar the option of exporting from its Vadinar refinery in India.

The deal will also increase Essar’s refining capacity by two thirds to 552,000 barrels a day. In a short statement, Shell said the deal was aligned with its strategy to concentrate its global manufacturing portfolio on larger and more sophisticated assets.

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