Shell reported last week it has signed an agreement to sell its Downstream business in Argentina to Raízen for US$0.95 billion in cash proceeds at completion, subject to customary closing conditions. The sale includes the Buenos Aires Refinery and associated lube base oil plant, around 645 retail stations, liquefied petroleum gas, marine fuels, aviation fuels, bitumen, chemicals and lubricants businesses, as well as supply and distribution activities in the country.
Additionally, after the transaction closes, the businesses acquired by Raízen will continue their relationships with Shell through various commercial agreements, which represent an estimated value of US$0.3 billion.
São Paulo, Brazil-headquartered Raízen, a joint venture set up in 2011 between Shell and Cosan, is a leading biofuels producer and fuels distributor in Brazil, where it already manages more than 6,000 Shell service stations.
“We plan to continue thriving in Argentina’s downstream market through Raízen,” John Abbott, Shell Downstream Director, said. “Raízen has already delivered significant value for us in Brazil and we will remain an important fuel supplier to Argentina under this deal.”
Shell has been in Argentina for more than 100 years. The Shell brand will remain prominent through a licensing agreement with Raízen. Customers in Argentina will continue to enjoy access to high-quality, Shell-branded products and services.
Shell said the agreement is consistent with its strategy to simplify its portfolio through a US$30 billion divestment program, and follows a strategic review of Shell’s Downstream business in Argentina that began in August 2016. The agreement with Raízen is the result of a competitive bidding process and the sale is expected to complete later this year. It offers the opportunity to consolidate a regional partnership between Shell and Cosan. Shell officials said the sales agreement calls for it to continue carrying Shell products.
The sale does not include Shell’s Upstream interests in the Vaca Muerta shale formation. Shell sees substantial long-term growth potential in Argentina’s shale resources.
Shell's lube base oil plant at it's refinery in Buenos Aires has the capacity to produce 1,500 barrels per day of API Group I base oil; it is one of the nation’s two base oil plants. The other being YPF's plant in La Plata which has a capacity to produce up to 4,700 bpd of Group I base oil.
Shell said the deal follows a strategic review of its downstream business in Argentina that began in August 2016.
The agreement with Raizen is expected to complete later this year. Raízen's bid topped rival offers by Argentina’s YPF SA, Chile’s Quinenco SA and China’s Petrochina Co.
George Morvey, Industry Manager Energy, Parsippany, NJ-based Kline consultancy told OEM/Lube News "Brazil is the leading country market in South America accounting for 42% of regional demand and the 6th largest globally at 3% of overall global demand. Argentina is #2 in South America at 11% regional demand and #26 at 1% globally. The top 5 finished lubricants suppliers overall in Argentina are YPF, Shell, followed closely by Total, then ExxonMobil, and Petrobras for a combined market share of over 90%."
Raízen is a joint venture between Shell (50%) and Cosan (50%). Raízen is the leading producer of sugar, ethanol and bioenergy in Brazil, with 26 production units and 860,000 hectares of cultivated agricultural land, a network of more than 6,000 Shell stations, 950 Shell Select convenience stores and more than 2,500 business customers. In Brazil, Raízen is present in 68 airport supply bases and in 68 fuel distribution terminals, and sells approximately 25 billion litres of fuel for the transportation, industrial and retail segments. Raízen’s current turnover is around US$24 billion per year.