Shell, Delek To Renew Talks On Montreal Refinery Sale

Delek US Holdings Inc. (DK) agreed to meet with Royal Dutch Shell Plc (RDSA) executives to re-start negotiations over the sale of Shell's Montreal East refinery, Shell said.

"Shell has received a response from Delek, who have agreed to meet to see if common ground can be reached regarding a potential sale of the Montreal East Refinery," Shell said in a statement released over the weekend.

Canadian politicians are putting pressure on both companies to renew talks in an effort to save jobs. On Friday, Shell had sent a letter to Delek asking them to agree to re-start negotiations within 48 hours. It said it was willing to sell the refinery for the C$150 million to C$200 million price listed in the term sheet earlier this year.

Delek was the only serious bidder for the 77-year-old, 130,000 -barrel-a-day refinery in Montreal East after Canadian politicians intervened in the bidding process, offering promises of cheap financing and other incentives to potential buyers in an effort to save more than 400 jobs there.

Before the Canadian government got involved, a more than one-year long sale process for the refinery failed to receive a single offer, leading Shell to announce in January that it planned to convert the refinery into a fuel terminal, which would result in hundreds of lay-offs.

At issue for any potential bidder is the cost of maintaining and upgrading the refinery, which executives at both companies estimated to be at least between C$600 million and C$800 million.

In a Parliamentary hearing last week, Richard Oblath, vice president of Shell Canada's downstream portfolio, told politicians 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.

Delek US Holdings is the U.S. downstream energy subsidiary of Delek Group DLKGF, DLEKG.TV), one of Israel's largest conglomerates.

-By Edward Welsch, Dow Jones Newswires; 403-471-3855; [e-mail]