Royal Dutch Shell (LSE: RDSB) (NYSE: RDS-B.US) this morning announced that it had agreed the sale of its downstream businesses (excluding aviation) in Australia to Vitol, subject to final regulatory approval. The disposal will generate a total of A$2.9bn (around £1.6bn) for Shell, but the company hasn’t yet announced its intentions for the cash pile.
The sale includes Shell’s Geelong Refinery and its 870-site retail business, together with with its bulk fuels, bitumen, chemicals and part of its lubricants businesses, but excludes Shell’s aviation business and its lube oil blending and grease plants in Brisbane.
Australian consumers may well not notice any change, as under the sale agreement reached with Vitol, the Shell brand will continue to be displayed across the company’s service station network, and the majority of Shell’s existing downstream staff in Australia will continue to operate the business under Vitol’s ownership.
Commenting on the sale, Shell’s CEO, Ben van Beurden, said:
“Australia remains important to Shell, but we are making tough portfolio choices to improve the company’s overall competitiveness.”
“Our customers will continue to benefit from the quality associated with the Shell brand and we are confident Vitol will invest in and grow the business.”
The sale of its Australian downstream businesses joins other recent downstream disposals by Shell, such as the sale of refineries in the UK, Germany, France, Norway and the Czech Republic, and the divestment of downstream businesses in Egypt, Spain, Greece, Finland and Sweden. Additionally, Shell has entered into downstream joint ventures, both with Vitol and other partners, in Africa, and has plans to sell some more downstream businesses in Italy and Norway.
At 2,371p, Shell’s share price is only just lagging the FTSE 100 over the past year, increasing 8.25% compared to the index’s 8.8% rise. But over five years Shell is seriously behind, with a gain of just 48%, versus a 76% rise for the FTSE 100. Shareholders will be hoping Shell’s “portfolio choices” boost its long-term performance.
