Shell To Quit New Zealand Business After Over A Century

Royal Dutch Shell has disclosed that it is ending its New Zealand operations after a presence of more than a hundred years. The Anglo-Dutch oil giant will sell its assets to OMV in a deal worth approximately $578 million. It is expected that the deal will have closed before this year’s fourth quarter. The oil major has been undertaking a strategic review of its New Zealand business for two years now and it comes in the wake of Shell disposing of its stake in the onshore gas field of Kapuni to Todd Energy last year in August.

According to a Shell press release OMV will acquire eight entities of the oil major including interests in Pokohura and Maui where the two are partners. Royal Dutch Shell will also dispose of a 60.98% stake in a venture in Great South Basin to OMV raising the ownership of OMV to 82.93%. After the conclusion of the deal Shell New Zealand and Shell Taranaki employees will be absorbed by OMV New Zealand.

Debt-reduction program

The exit of Royal Dutch Shell from New Zealand is part of the company’s goal to dispose of assets worth approximately $30 billion before the end of this year as part of a debt-reduction program. The oil major has also set a goal of simplifying its upstream portfolio.

This comes in the wake of the Anglo-Dutch giant disclosing that its sales of lubricants in Russia have doubled since 2014, a silver lining for a firm that was pushed into limiting upstream operations in the country due to Western sanctions. The oil major unveiled its Torzhok lubricants facility in northwest Russia six years ago and set a production goal of 200 million liters per year. Shell expects to attain the production goal ten years from now. At the moment 90 million liters of lubricants are produced on a yearly basis.

Improved profitability

Besides the production at Torzhok Shell also imports into Russia an additional 30 million liters per year from its other facilities located elsewhere. According to the Torzhok plant head, Maxim Solovyov, the profitability of producing lubricants in Russia for Shell improved after the sanctions and lower prices and a weakened rouble since the global costs of the company are in United States dollars. Consequently Russia has emerged as one of Shell’s most important markets with regards to lubricants.

“Russia is one of our priority (lubricant) markets along with Mexico, China, Indonesia and India. In these countries Shell plans the most rapid growth during the next 10 years,” said Solovyov.

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