Shell has struck an agreement to sell its 645 gas stations and other downstream assets to Brazilian-based Raízen for US $950 million, while at the same time retaining its interest in the Vaca Muerta shale deposits.
In addition, the deal includes liquefied petroleum gas, marine fuels, aviation fuels, bitumen, chemicals, and lubricants businesses, as well as supply and distribution activities. The gas stations and gasoline will retain Shell branding; Shell and Raízen have struck commercial agreements for another US $300 million.
Raízen is a joint venture of Shell and Brazil’s Cosan, and as such the company already markets Shell products in Brazil. “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.”
According to Reuters, Raízen beat out competition from YPF, Chile’s Quinenco SA, and China National Petroleum Corp’s Petrochina Co and is set to pick up a 20 percent share of the consumer market. Shell typically has the highest prices for its gasoline products in Argentina, with consumers also regarding it being at the high end in terms of quality.
Shell has noted that “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.”
While it is parting ways with its downstream business, Shell is hanging on to its upstream – exploration and production – interests in the Vaca Muerta shale formation. A press release noted that “Shell sees substantial long-term growth potential in Argentina’s shale resources.”
The sale is expected to be completed by the end of this year.