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Shell to divest its downstream business in Argentina to Raízen

Global oil and gas major Royal Dutch Shell plc (Shell) has announced that it has signed an agreement to sell its downstream business in Argentina to Raízen for US$0.95 billion in cash proceeds at completion, subject to customary closing conditions. Raízen, a joint venture set up in 2011 between Shell and Cosan, is a leading biofuels producer and fuels distributor in Brazil, where it already manages more than 6 000 Shell service stations.

Crushing sugar cane at a Raízen mill, Brazil. Chopped sugarcane stalks pass through a series of rollers that crush the cane and squeeze out the juice. (Photo courtesy Shell/Raízen).

Crushing sugarcane at a Raízen mill, Brazil. Chopped sugarcane stalks pass through a series of rollers that crush the cane and squeeze out the juice. (Photo courtesy Shell/Raízen).

According to a statement April 24, the deal includes the Buenos Aires Refinery, around 645 retail stations, liquefied petroleum gas, marine fuels, aviation fuels, bitumen, chemicals and lubricants businesses, as well as supply and distribution activities in the country. Additionally, after the transaction closes, the businesses acquired by Raízen will continue their relationships with Shell through various commercial agreements, which represent an estimated value of US$0.3 billion.

Raízen is a 50:50 joint venture between Shell and Cosan and a 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. In Brazil, Raízen is present in 68 airport supply bases and in 68 fuel distribution terminals and sells approximately 25 billion litres of fuel for the transportation, industrial and retail segments.

We plan to continue thriving in Argentina’s downstream market through Raízen. Raízen has already delivered significant value for us in Brazil and we will remain an important fuel supplier to Argentina under this deal, said John Abbott, Shell Downstream Director.

Shell has been in Argentina for more than 100 years. The Shell brand will remain prominent through a licensing agreement with Raízen. The agreement is consistent with Shell’s strategy to simplify its portfolio through a US$30 billion divestment programme and follows a strategic review of Shell’s Downstream business in Argentina that began in August 2016.

The agreement with Raízen is the result of a competitive bidding process and the sale is expected to complete later this year. It offers the opportunity to consolidate a regional partnership between Shell and Cosan. The sale does not include Shell’s upstream interests in the Vaca Muerta shale formation. Shell sees substantial long-term growth potential in Argentina’s shale resources.

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