Royal Dutch Shell to close its Louisiana-based refinery

  • November 28, 2020 08:17 AM GMT
  • Kunal Sawhney
    CEO Kunal Sawhney
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    Kunal Sawhney is founder & CEO at Kalkine and is a richly experienced and accomplished financial professional with a wealth of knowledge in the Australian Equities Market. Kunal obtained a Master of Business Administration degree from University of T...

Royal Dutch Shell to close its Louisiana-based refinery

Oil and gas major Royal Dutch Shell plc (LON: RSDA) is planning to permanently shutdown its 211,146 bpd Convent refinery in Louisiana by early next week. On 5 November, the company had announced that it would be closing the refinery as it had failed to find a suitable buyer. The company was badly affected by the pandemic crisis due to the low demand of its refined products.

In July, Shell had put up the refinery for sale but was quick to pull the plug, sources within the company said. Two of its plants, Anacortes refinery in Washington and Saraland chemical plant in Alabama, have also been up for sale for a long time while being under operations.

The Louisiana-based Convent refinery, unlike many oil refineries that were recently closed, is far from being obsolete. As per the US standards, the refinery is quite big and sophisticated for converting a wide range of crude into high-value fuels. But due to low demand, the third largest oil company of the world wishes to reduce its refining capacity.

The Royal Dutch Shell stocks were trading at a value of GBX 1,339.40 before the market closed on 27 November. 

Interesting Read: Royal Dutch Shell Plc Slashes Dividend for The First Time in Nearly Eight Decades 

The Convent refinery

Shell’s refinery is the first US Gulf Coast refinery to shut down because of the pandemic crisis. The Louisiana’s Convent refinery is situated 57 miles west of New Orleans and is spread over 4,400 acres and can process 240,000 barrels of crude oil daily. Situated at St. James Paris, the processing equipment used for the refinery purpose is spread on approximately 900 acres of land. 

Various grades of diesel fuel, gasoline, heating oil, and jet fuel are produced by the refinery. The company manufactures butane and propane for industrial and residential use and oil for power generation, tankers, and vehicles.  

Workers in the mix  

There are around 700 Shell employees and 400 contract workers who work at the refinery. Sources said Shell and the United Steel Workers Union have consented that the workers would be paid for three weeks for each year of service, with a minimum of 12 and a maximum of 78 weeks.

This package can be obtained by the 350 USW workers. A similar package has been offered to the full-time staff. Some of the hourly workers will be retained for a clean-up until Q3 next year. Rest of them who have been laid off can apply for jobs at Norco refinery in Louisiana and Geismar chemical plant in Louisiana of Shell.

Refineries across Europe and the US are fighting a deeper economic crisis. The long-term outlook for the demand for oil is gradually fading away. Eight other plants in North America have either halted their operations or are mulling over a closure.

 


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