Shell agrees to sell German refinery stake to Prax Group

Amanda Jordan and Rachel Graham, Bloomberg December 15, 2023

(Bloomberg) — Shell Plc agreed to sell its stake in the Schwedt refinery, a plant that supplies much of eastern Germany with fuel and has been caught up in Europe’s standoff with Moscow over the war in Ukraine. 

Shareholdings in the refinery were left in limbo when Germany seized it from Russian majority owner Rosneft PJSC after the invasion and sanctions threatened its main supply source.

Shell has been trying to sell its Schwedt stake for years, part of a plan to reduce its global refining portfolio to core sites such as Rheinland in Germany. The sale of its 37.5% holding to Prax Group is expected to close in the first half of 2024, subject to regulatory approvals. Financial terms weren’t disclosed. 

“Strategically this is in line with what the company has previously stated,” said Biraj Borkhataria, an analyst with RBC. “Uncompetitive energy costs and tougher crude sourcing due to restrictions on Russian crudes are likely to make economics even more challenging for European refiners.”

The Schwedt refinery was forced to curb output earlier this year when it lost supplies of Russian Urals crude that had been delivered through the Druzhba pipeline system since the refinery was built in the 1960s. It now secures supply of Kazakh crude through that network, adding to deliveries from the ports of Gdansk in Poland and Rostock in northern Germany. 

Prax first made its name in refining three years ago when it bought the Lindsey refinery in the UK from TotalEnergies SE. The company, which has trading and retail operations, bought a stake in a South African oil-processing facility two weeks ago.

Shell was in talks to sell the holding with Varo Energy as early as 2016. A company called Alcmene GmbH then struck a purchase agreement for Shell’s stake more than two years ago, but Rosneft also wanted the holding and exercised its right of first refusal, setting the stage for a protracted wrangle. 

Germany seized Rosneft’s local unit in September 2022 as Berlin moved to take sweeping control of its energy industry, secure supplies and sever decades of deep dependence on Moscow. One of the most critical assets in the deal was the Schwedt refinery on the Polish border.

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