Shell has signed an agreement to sell its downstream business in Argentina to Raízen Combustiveis SA for USD 950 million in cash, subject to customary closing conditions. The sale 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 USD 300 million.
The sale, which is expected to complete later this year, offers the opportunity to consolidate a regional partnership between Shell and Cosan.
Raízen is a joint venture between Shell (50%) and Cosan (50%) established in 2011. Raízen is the 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 liters of fuel for the transportation, industrial and retail segments. Raízen’s current turnover is around USD 24 billion per year.
“We plan to continue thriving in Argentina’s downstream market through Raízen,” Shell Downstream Director John Abbott said. “Raízen has already delivered significant value for us in Brazil and we will remain an important fuel supplier to Argentina under this deal.”
Shell has been in Argentina for more than 100 years. The Shell brand will remain prominent through a licensing agreement with Raízen.
Shell said the agreement is consistent with its strategy to simplify its portfolio through a USD 30 billion divestment program 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. Raízen´s bid topped rival offers by Argentina’s YPF SA, Chile’s Quinenco SA and China’s Petrochina Co.
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.