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Shell (SHEL) to Sell Off Its Singapore Refinery and Other Assets

Shell plc SHEL, a British energy giant, announced the sale of its refinery and petrochemical assets in Singapore to a joint venture company formed by Indonesia’s Chandra Asri and Glencore. The transaction is anticipated to close by the end of 2024, subject to regulatory approvals. However, the companies have not mentioned a value for the same.

The joint venture company CAPGC will own all of Shell’s interest in Shell Energy and Chemicals Park Singapore, following the close of the deal. CAPGC is operated by Chandra Asri who holds a majority stake in the company along with Glencore who holds a minority stake.

The assets being sold include a refinery with a processing capacity of 237,000 barrels per day (bpd) of oil and a 1-million-metric-ton-per-year (tpy) ethylene plant located on Bukom Island. In addition, SHEL’s assets also include mono-ethylene glycol producing plant on Jurong Island.

The sale can be linked to its plan to lower its overall carbon footprint while also focusing on its most profitable ventures.

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The buyers of Shell’s assets in the Bukom and Jurong islands in Singapore will gain access to one of the world’s leading oil refining and trading centres. However, the buyers will have to encounter several challenges such as, competition from newer refineries, particularly those in China and other regions. The Bukom facility, is known to be quite old, having opened in 1961. Moreover, it needs to be noted that Singapore’s carbon tax is expected to increase significantly in 2024.

By acquiring SHEL’s assets in Singapore Chandra Asri will be able to access naphtha feedstock for its cracker. It will also enable integration of petrochemical production with refining, which is expected to improve its efficiency and contribute to cost reduction for Chandra Asri. Chandra Asri had been looking to expand its portfolio within and beyond Indonesia and the acquisition will position the company as a regional player in Southeast Asia.

For Glencore, acquiring the assets would give it a physical foothold for its trading operations in Asia. Currently, Glencore’s only refining asset is a 100,000-bpd facility in Cape Town along with a lubricants plant in Durban.

A partnership between Glencore and Chandra Asri will allow the latter to leverage the trading giant's expertise in trading and in logistics, enhancing its capabilities in the region.

Zacks Rank and Key Picks

Currently, SHEL has a Zacks Rank #3 (Hold).

Some better-ranked stocks in the energy sector are SM Energy SM, Hess Corporation HES and Eni SpA E. SM Energy and Hess presently sport a Zacks Rank #1 (Strong Buy) each, while Eni carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

SM Energy is an upstream energy firm operating in the prolific Midland Basin region and the South Texas region. For 2024, the company expects its production to increase from the prior-year reported figure, signaling a bright production outlook.

Hess is a leading upstream energy company, with its operations focused on the prolific resources offshore Guyana. The company has made significant oil discoveries in the Stabroek Block, off the coast of Guyana. These discoveries have totaled more than 11 billion barrels of oil equivalent in gross recoverable resources, adding to Hess’ production potential.

Eni is a leading global integrated energy company with a prominent focus on liquefied natural gas businesses. As natural gas has a lesser carbon footprint compared to other fossil fuel, it will play an important role in the global energy transition process. Eni’s participation in the natural gas market will allow it capitalize on the mounting global demand in the future.

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Hess Corporation (HES) : Free Stock Analysis Report

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