Shell eyes sale of chemicals plants in US, Europe

UK oil major Shell is exploring the potential sale of its chemicals assets in Europe and the US, the Wall Street Journal reported on March 2, citing sources familiar with the matter.

The energy major has engaged Morgan Stanley to carry out a strategic review of its chemicals operations, the report said. As of time of writing, neither Shell nor Morgan Stanley have commented on the report.

Potential buyers could include private equity firms and Middle Eastern entities looking to expand their presence in Western markets, according to the WSJ.

The review remains at an early stage, and no final decisions have been made regarding a sale, the report added. Among the assets under consideration is Shell's Deer Park facility in Texas, which is located next to a 340,000 barrel-per-day (bpd) refinery that the company sold entirely to Mexican state oil firm Pemex as part of a previous transaction. The Deer Park chemicals site produces ethylene, benzene and phenol, among other products, and employs 1,500 workers.

Shell operates four chemical plants in total in the US, with a combined capacity of 7.2mn tonnes per year, and six more in Europe, across the Netherlands, Germany and the UK, with a combined capacity of 2.7mn tpy. The petrochemicals sector in Europe has been hit hard by weak local demand and high energy costs over recent years, with plants struggling to compete with rival producers in lower-cost regions like the Middle East.

Last year, Shell also offloaded its refining and chemicals hub in Singapore, one of the largest such complexes globally. The facilities on Pulau Bukom and Jurong island included a 237,000 bpd refinery, an 1.1mn tonne-per-year ethylene cracker and various other units for producing petrochemical products including ethylene oxide, ethoxylates, styrene monomer and propylene oxide.

The UK oil major warned earlier this year that trading in its chemicals and oil products division was expected to decline significantly on a quarterly basis owing to weaker seasonal demand.

CEO Wael Sawan has been focused on cost reductions and a renewed emphasis on the company’s most profitable sectors – oil, gas and biofuels – while scaling back involvement in renewable power. In December, Reuters reported that Shell was retreating from new offshore wind investments and restructuring its power division following a strategic review. The business had previously been regarded as central to the company’s energy transition strategy.