Essar inks pact to buy Stanlow refinery in UK

London-listed Essar Energy on Tuesday said it has signed an agreement to acquire Royal Dutch Shell's Stanlow refinery in NorthWest England for $350 million.

"Acquisition of the Stanlow Refinery, which is the second largest refinery in the UK, will give Essar Energy direct access to the UK market," the company said in a press statement.

Essar through its indirect wholly owned subsidiary, entered into an asset purchase agreement with Shell UK Ltd to acquire the oil refinery and other associated assets at Stanlow, near Ellesmere Port, Cheshire.

"It (the refinery) is also aligned with Essar Energy?s strategy to provide options for the export of products from its high value refinery at Vadinar in Gujarat," it said.

Acquisition price will be $350 million plus inventory at cost price, Essar said.

Essar had on February 18 announced acquisition of the Stanlow refinery to make the Ruias-promoted firm the first Indian refiner with "truly global footprint".

Essar owns a refinery at Vadinar in Gujarat, which can process 280,000 barrels of crude oil per day.

It also owns a 90,000 bpd unit in Kenya and is expanding Vadinar to 400,000 bpd (20 million tons). Stanlow has nameplate capacity of 296,000 bpd but currently operates at 220,000 bpd.

Together, it will now have a little less than one per cent of global oil refining capacity of 88 million bpd.

"Essar Energy is acquiring the Stanlow Refinery at a competitive price when compared with other recent refinery transactions," the statement said.

Essar is paying $1,182 per barrel of Stanlow's daily throughput capacity of 296,000 barrels. By comparison BP Coryton sold in 2007 to Petroplus for $8,140 per barrel.

Milford Haven was sold to Murphy Oil Co in 2007 for $3,307 per barrel while Ruhr Oel in Germany was sold by PDVSA to Rosneft in 2010 for $3,376 per barrel.

Company chief executive Naresh Nayyar said: "Stanlow is a high quality refinery and is an excellent fit with our strategy. We look forward to taking ownership of Stanlow in due course and making operational improvements, which will enhance production and better optimise the facility."

The acquisition is conditional on approval of Essar Energy's shareholders at a General Meeting, notice of which will be included in a circular to be sent to Essar Energy's shareholders in due course.

"It is expected that the acquisition will be completed during the second half of 2011," the statement said.