Essar bids for three Shell refineries in Europe

©Getty Full tank: Shell has assured that its Stanlow refinery in Ellesmere will be sold as a going concern

Essar, the Indian conglomerate, has bid for three European Royal Dutch Shell refineries on sale as part of the Anglo-Dutch oil group’s restructuring of its downstream operations.

Essar – the conglomerate that spans mobile phones, steel, shipping and energy and is founded and controlled by Ravi and Shashi Ruia – is understood to be one of several potential buyers.

Valero, the US refiner looking to expand in Europe and Libya, and an investment vehicle controlled by part of the Saudi royal family also have expressed interest.

Essar is understood to be among the bidders for two German refineries as well as Shell’s Stanlow UK refinery at Ellesmere, in Cheshire.

Stanlow is Shell’s only UK refinery, employs 1,000 people and 800 contractors and has a capacity of 272,000 barrels a day, producing about a sixth of the UK’s petrol.

The disposals by Shell are part of its strategy to rid itself of smaller refineries in favour of investing in large, integrated complexes, such as those in Port Arthur, Texas and Rotterdam. The package is valued at about £1.5bn ($2.4bn).

Refinery sales have been controversial because of the potential of large job losses.

Indeed, UK refinery workers have in the past month threatened strike action over pay and other issues.

In the hope of avoiding potential criticism, Shell said: “If a deal is pursued, the refinery would be sold as a going concern. If no deal is pursued, Stanlow will be retained in the Shell portfolio. There are no plans to close the refinery or associated local marketing businesses.”

The two German refineries in Hamburg and Heide do not come with the same assurances. They have an aggregate capacity of about 200,000 b/d and each employs about 500 workers.

Shell is also looking to sell its Montreal East refinery in Canada, which has a capacity of 121,000 b/d.

Shell would not confirm the bid or interested parties. The company said on Monday: “The review of the refineries is still going on and will still take some time.”

Lazard is running the auction for Shell. Results are expected to emerge in coming weeks.

The sale of the refineries and some of the local wholesale distribution attached to them are part of Shell’s drive to cut costs, which has become doubly urgent as the recession has hit petroleum product demand and cut oil prices by more than half. But Shell is not getting out of refining as a whole.

Last week, when Shell announced its $500m investment in a new hydrodesulphurisation plant at its Pernis refinery in the Netherlands, Tom Botts, its downstream executive vice-president, said: “The investment is part of Shell’s strategy of selective downstream growth and focus on larger, integrated refining and chemical sites.”