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Shell puts Vitol under the pump

Royal Dutch Shell has agreed to sell its downstream businesses (excluding aviation) in Australia to independent oil trader Vitol for $2.6bn
February 21, 2014

Royal Dutch Shell (RDSB) has agreed to sell its downstream businesses (excluding aviation) in Australia to the Dutch-owned independent oil trader Vitol. The deal will generate $2.6bn (£1.6bn) for Shell, and follows on from separate agreements to sell refineries located in the UK, Germany, France, Norway and the Czech Republic.

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Problems linked to Shell’s refining and forecourt businesses are nothing new, but after January’s shock profits warning it was inevitable that Shell would hive off some underperforming downstream assets, although the scale of the subsequent fire sale might surprise some industry analysts.

Vitol, which also acquired the bulk of Shell’s downstream assets in Africa three year’s ago, will keep on selling petrol under the Shell brand name in Australia as part of the agreement. Whether or not Vitol’s trading expertise will outweigh the squeeze on refining margins is anyone’s guess, but the deal edges Shell a little closer towards its $15bn divestment target for 2014/15.

Back in 2011, we ventured that moves by both Marathon Oil and ConocoPhillips to spin-off their downstream assets could herald a period of de-integration among the oil majors. In the event, that process is taking longer than we anticipated, but Shell’s determination to streamline it business model would not have gone unnoticed in the boardrooms of ExxonMobil, Total SA and BP (BP.).