Shell, Delek End Montreal Refinery Talks Without Sale

A last-ditch effort to save Royal Dutch Shell PLC's (RDSA) Montreal East refinery from closure was unsuccessful, Shell said, after the company failed to come to terms with Delek US Holdings Inc. (DK) over a potential sale.

Canadian politicians intervened in the fate of the 77-year-old refinery when Shell announced plans early this year to covert it to a fuel terminal after failing to find a buyer for the refinery last year. The jobs of nearly 500 refinery workers will likely be lost after the refinery is shut down.

Delek US, the U.S. downstream energy subsidiary of Delek Group (DLKGF, DLEKG.TV), one of Israel's largest conglomerates, was the only serious bidder for the refinery during a second sale process that ended in June. At a parliamentary hearing, Shell and Delek agreed to discuss a sale a second time.

Negotiations last week "once again reached an impasse, leading both parties to terminate discussions," Shell said in a release.

Shell had said it was willing to sell the 130,000-barrel-a-day refinery for C$150 million to C$200 million, but that would be in addition to the cost of needed upgrades and maintenance, which executives at the companies estimated between C$600 million and C$800 million.

Richard Oblath, vice president of Shell Canada's downstream portfolio, told politicians during a hearing last month that despite investing more than C$400 million in the Montreal East refinery over several years, Shell was unable to make it competitive against newer, more modern refineries.

"We must now direct our attention toward converting the refinery into a terminal in a way that is safe and ensures that there is an adequate supply of fuel for our customers in Quebec, Atlantic Canada, and Eastern Ontario," Shell said in the release.

-By Edward Welsch, Dow Jones Newswires; 403-229-9095; [e-mail]