Shell to shutter Louisiana refinery by yearend

Nov. 23, 2020

Royal Dutch Shell PLC is shutting down subsidiary Equilon Enterprises LLC (dba Shell Oil Products US)’s 239,000-b/d refinery in Convent, St. James Parish, La., as part of the company’s broader global program to focus investments on a core set of integrated manufacturing sites more strategically positioned for the transition to a low-carbon future.

The decision to close the refinery follows Shell’s notification to Convent staff in July that it was seeking to divest the site in a process during which, despite efforts, a viable buyer never emerged, the operator said Nov. 5.

Following completion of the shutdown process, which will begin mid-November, Shell said it will continue to market the Convent refinery for divestment.

In the meantime, the operator is working to assist its nearly 700 employees affected by the refinery’s closure in either applying for alternate opportunities within the company or in transitioning to a future outside of Shell.

Despite the refinery’s shutdown, Shell said it remains committed to retaining a meaningful presence in Louisiana via its integrated refining and chemical sites at Norco and Geismar, La., its midstream infrastructure assets, branded retail presence, US Gulf of Mexico offshore deepwater operations, and offices in New Orleans.

In a separate statement, Louisiana Gov. John Bel Edwards reassured the state will support Shell in its efforts to both reemploy Convent employees and sell or repurpose the industrial site.

“It’s important to note that Shell is reducing the number of standalone refineries companywide in favor of consolidated industrial sites that integrate refining and chemical operations,” Gov. Edwards said. “This decision is not due to a lack of competitiveness on the part of Louisiana’s business climate or workforce.”

Shell currently employees about 4,000 people in Louisiana, according to the governor.

Shell’s reshaping program

The closure of its Convent refinery follows Shell’s late-September announcement that it plans to integrate its chemicals and manufacturing businesses to create an end-to-end chemicals and products organization consisting of six energy and chemical parks focused on delivering lower-carbon products to customers.

As a result of the coronavirus (COVID-19) pandemic and as part of its goal to become a net-zero energy business by 2050 or sooner, Shell has had to act quickly and decisively, making some very tough financial decisions to ensure the company remains resilient, Ben van Buerden, Shell’s chief executive officer, said on Sept. 30.

A cornerstone of Shell’s net-zero emissions future is a focus on helping its customers decarbonize, according to van Beurden.

“Currently, about 85% of our carbon footprint comes from our customers’ emissions when they use our products. That is where the real challenge is,” said Van Buerden. “[It’s] a mission of working with society to help it get to net zero. Because it is not good enough to just wait and see what society does. No. To help, we have to shape that journey. I believe that is what our customers, and society in general, have been telling us over the last few years.”

The reshaping program involves dramatic change for Shell, including changes to its business plans over time to become net zero in all its operations.

“[This] means major changes at refineries, chemicals sites, onshore and offshore production facilities,” Van Buerden said. “But it also means that we have to change the type of products that we sell. You cannot do that by just having different products which still produce emissions. We will have some oil and gas in the mix of energy we sell by 2050, but it will be predominantly low-carbon electricity, low-carbon biofuels, it will be hydrogen, and it will be all sorts of other solutions too.”

In the downstream, the program entails reducing Shell’s refining footprint to less than 10 sites, keeping those sites that are strategically essential in key locations, with flexibility to adapt and further integrate with the company’s growing chemicals and trading businesses.

While the company remains in the process of working out specific details, Shell said it expects the reshaping program’s efficiency, reduced organizational complexity, and other measures will reduce between 7,000-9,000 jobs (including about 1,500 employees who have agreed to take voluntary redundancy during 2020) to result in an annual cost saving of $2-2.5 billion by yearend 2022 and partially contribute to a previously announced underlying operating cost reduction of $3-4 billion by first-quarter 2021.

Shell currently holds interest in 14 refineries, 11 of which it acts as operator.

Following the reshaping program, Shell’s remaining refining assets will include:

  • Shell Deutschland Oil GMBH’s 140,000-b/d refinery at Wesseling, Germany, which together with the former Godorf refinery near Cologne-Godorf, form its 325,000-b/d integrated Rheinland refinery, Germany’s largest.
  • Shell Nederland Raffinaderij BV’s 405,000-b/d Pernis refinery and integrated petrochemical production site in Rotterdam, the Netherlands.
  • Shell Singapore’s 463,000-b/d integrated Pulau Bukom refinery on Bukom Island, Singapore.
  • Shell Scotford’s integrated 92,000-b/d refinery and chemicals plant near Edmonton, Alta.
  • Equilon Enterprises LLC (dba Shell Oil Products US)’s 229,000-b/d refining and petrochemical complex in Norco, La.
  • Shell Deer Park Refining LP’s 312,000-b/d integrated integrated refining and petrochemicals manufacturing site in Deer Park, Tex.

Shell most recently announced Equilon Enterprises LLC (dba Shell Oil Products US) would further trim its US refining operations with the proposed sales of its 137,000-b/d Puget Sound refinery near Anacortes, Wash., and subsidiary Shell Chemical LP’s 90,000-b/d Saraland refining and petrochemical site in Mobile, Ala., as part of ongoing plans to reshape its refining portfolio globally to leverage the company’s natural strengths and integration opportunities (OGJ Online, Mar. 9, 2020).

In February, the company also completed the sale of its 157,000-b/d dual-coking refinery and integrated logistics assets at Martinez, Calif., to PBF Energy Inc. subsidiary PBF Holding Co. LLC for $1.2 billion (OGJ Online, Feb. 3, 2020).