The Shell Group has wanted to sell its shares in the large northeast German refinery PCK for years. A buyer has already been found. But many questions remain unanswered.
A lot is in limbo for the PCK Schwedt refinery, one of the most important industrial plants in the northeast of the Republic. The Russia sanctions have hit the facility that used to be supplied with Russian oil. The company is largely under federal control, and it is unclear what will happen next. Not to mention the distant, greener future. But there is now a decision on one point: the energy giant Shell wants out as a shareholder and has won the British Prax Group as a buyer. This will take over 37.5 percent of the refinery.
The management of PCK, the federal government and the state of Brandenburg viewed this on Friday as a signal of stability for a company that not only depends on thousands of jobs in eastern Germany, but also supplies the northeast with gasoline, diesel and kerosene. According to dpa information, nothing will change for consumers with the deal – the supply of crude oil to the PCK and the distribution of fuel in the region should continue as before, it was said. Nevertheless, there is also clear criticism.
“It can’t be the case that these important shares go to a small British oil trader,” said left-wing politician and PCK expert Christian Görke to the German Press Agency. Prax will not be able to carry out the planned conversion into a green refinery for e-fuels and hydrogen because the future concept will cost at least 15 billion euros. Görke’s demand: The federal government should take over the Shell shares itself and secure the location permanently.
the initial situation
The history is quite confusing. Shell has been planning to sell its shares for years, according to its own statements, in order to concentrate its refining business on a few locations. The Austrian Alcmene Group was long considered the most likely buyer, but in 2021 the deal was almost perfect. But then the Russian state-owned company Rosneft, which owns a good 54 percent of the shares in PCK through two subsidiaries, asserted a right of first refusal.
That failed when Russia attacked Ukraine in early 2022 and the European Union responded with sanctions. This was a deep turning point for PCK, as the plant had processed almost exclusively Russian crude oil from the Druzhba pipeline since the 1960s. The federal government wanted to end this for political reasons. Therefore, the federal government took over the Rosneft shares as trustee and thus effectively controlled the majority of the company. Instead of Russian oil, PCK now purchases tanker oil via the ports of Rostock and Gdansk as well as oil from Kazakhstan, transported via the Druzhba.
The buyer
The British Prax Group trades internationally in crude oil, petroleum products and biofuels. According to its own information, it has 1,450 employees at eight locations worldwide. Compared to the British company Shell, which has more than 90,000 employees worldwide and annual sales of $380 billion, Prax is very small.
In a statement, Prax emphasized its strategic interest in gaining a stronger foothold in the EU. Regarding the plans for PCK, it said: “The group plans to support the refinery’s activities in the energy transition already underway and open up further opportunities for the region.” And further: “This purchase will bring new investments for the refinery.”
What getting started could mean
The response in Schwedt was initially positive, albeit cautious. “I am happy about this announcement because it gives us clarity and planning security for the future of our PCK,” explained PCK boss Ralf Schairer. The works council added: “It is important for us that with Prax a company acquires the shares that has an interest in securing the location and jobs.”
The Federal Ministry of Economics and the State of Brandenburg made similar statements. “There is now planning security for the PCK Schwedt,” explained a spokesman for the Federal Ministry. Brandenburg’s Economics Minister Jörg Steinbach (SPD) noted that Prax not only has experience with petroleum, but also operates hydrogen projects. “I see a positive development for Schwedt.”
The hurdles
But there are still many questions unanswered. Shell said the deal was expected to close in the first half of 2024, “subject to partner rights and regulatory approvals.” The current shareholders in turn have a right of first refusal. In addition to Rosneft, this includes the minority owner Eni, which owns 8.3 percent.
For the Rosneft shares of around 54 percent, the decision on a right of first refusal would probably lie with the trustee federal government. What will happen to this remained open on Friday, as did the question of what the federal government plans to do with the Rosneft shares in the medium term. They don’t belong to the state, it just manages them. This initially runs until March 2024.
Source: Stern
