KUALA LUMPUR (Feb 1): Shell Overseas Holdings Ltd, a wholly-owned unit of Royal Dutch Shell plc, has agreed to sell its 51% stake in Shell Refining Co (Federation of Malaya) Bhd to Malaysia Hengyuan International Ltd (MHIL) - the local unit of a private Chinese refiner - for US$66.3 million.

The transaction is expected to be completed sometime this year, subject to obtaining regulatory approval, Shell said.

The remaining shares are still held by the Employees Provident Fund, which is the second largest shareholder of Shell Refining with a 15.93% stake, followed by Permodalan Nasional Bhd at 12.63%, and Kumpulan Wang Persaraan (Diperbadankan), 2.38%.

In a statement today, Shell said it has reached a conditional agreement with MHIL for the sale of Shell Refining.

"It is MHIL’s intention for Shell Refining to invest in the upgrades needed to meet the Euro 4M and Euro 5 (cleaner fuel) requirements," it added.

Shell also said Shell Malaysia Trading Sdn Bhd will continue to supply its retail and commercial customers in Malaysia and honour other existing commitments through an existing comprehensive supply strategy that includes a long term offtake from Shell Refining," it added.

Shell noted that the sale is consistent with the group’s strategy to concentrate on its global downstream footprint and businesses where it can be most competitive.

"Malaysia continues to be an important country for Shell. Shell is the leading retail fuels and lubricants provider and continues to invest in growing these businesses in the country," it said.

Globally, other recent downstream divestments by Shell include the sale of downstream businesses in Australia and Italy; a number of retail sites in the United Kingdom; and the initial public offering of, and further drop downs to, Shell Midstream Partners LP.

Shell said it has also agreed the sale of its marketing business in Denmark and Norway, its liquefied petroleum gas businesses in France and a 33.24% shareholding in Showa Shell Sekiyu KK.

On Jan 20, The Edge Financial Daily and Sin Chew Daily, quoting a Chinese media report, reported that Shandong Hengyuan Petrochemical Co Ltd will invest US$130 million to acquire Shell Refining. However, when asked on the matter, Shell Refining said it had nothing to announce at that point of time.

Two days later, on Jan 22, Shell Refining said its major shareholder Shell was in discussions with China's state-owned enterprise Shandong Hengyuan Petrochemical Co Ltd.

Shell Refining operates a refinery in Port Dickson, Negeri Sembilan, which has a capacity to process 156,000 barrels of crude oil per day.

Shell Refining shares closed 7 sen or 1.44% higher at RM4.94 on Friday, giving it a value of RM1.48 billion.