Essar Energy on verge of buying Shell's UK refinery

Essar Energy is likely to sign an initial agreement this week for the acquisition of Royal Dutch Shell PLC's Stanlow refinery in the UK.

Essar has taken a significant step towards the purchase by agreeing to pay a break fee if it decides to back out of the acquisition.

The ''exclusivity agreement'' signed by Shell and Essar on Friday means that the future of the UK's second-largest refinery should be settled by early April.

If Essar's purchase for £215 million ($350 million) goes ahead, it will mark Shell's final departure from the UK's refining market.

Naresh Nayyar, chief executive of Essar, described Stanlow as a ''high quality refinery in terms of its employees, its assets, its location and its customer base''. He added, ''Stanlow also fits very well with our strategy of providing options for the export of high quality products from our Vadinar refinery in India.''

Essar has until 31 March to confirm that it wants to buy Stanlow. If it decides not to proceed, it will be liable for a break fee of $50 million. If Essar decides to go ahead, Shell will have three days to decide whether to accept – and it will be liable for a $10 million fee if it turns down the offer.