Shell exits PCK refinery Schwedt

Energy - Shell exits PCK refinery Schwedt - and now?

Much is up in the air for the PCK refinery in Schwedt, one of the most important industrial plants in the north-east of the republic. The Russia sanctions have hit the plant, which 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 more distant, greener future. But there is now a decision on one point: Energy giant Shell wants out as a shareholder and has secured the British Prax Group as a buyer. This is to take over 37.5 percent of the refinery.

The management of PCK, the federal government and the state of Brandenburg saw this on Friday as a signal of stability for a company on which not only thousands of jobs in eastern Germany depend, but also the supply of petrol, diesel and kerosene to the north-east. According to dpa, the deal will not change anything for consumers - the supply of crude oil to the PCK and the distribution of fuel in the region will continue as before, they said. Nevertheless, there is also clear criticism.

"It can't be right that these important shares go to a small British oil trader," said Christian Görke, a politician from the Left Party and PCK expert, to the German Press Agency. Prax will not be able to cope with the planned conversion to a green refinery for e-fuels and hydrogen, as 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 site in the long term.

The initial situation

The background is rather confusing. Shell has been planning to sell its shares for years, according to its own statements, in order to concentrate its refinery business on a few locations. The Austrian Alcmene Group was long considered the most likely buyer, and the deal was almost perfect in 2021. But then the Russian state-owned company Rosneft, which owns a good 54% of the shares in PCK via two subsidiaries, asserted a right of first refusal.

This failed when Russia attacked Ukraine in early 2022 and the European Union responded with sanctions. This was a major blow for PCK, as the plant had been processing almost exclusively Russian crude oil from the Druzhba pipeline since the 1960s. The German government wanted to put an end to this for political reasons. The federal government therefore took over the Rosneft shares as a trustee and thus effectively took control of the majority of the company. Instead of Russian oil, PCK now obtains tanker oil via the ports of Rostock and Gdansk as well as oil from Kazakhstan, transported via the Druzhba pipeline.

The buyer

The British Prax Group trades internationally in crude oil, petroleum products and biofuels. According to its own information, it has 1450 employees at eight locations worldwide. Prax is very small compared to Shell, another British group with more than 90,000 employees worldwide and an annual turnover of 380 billion US dollars.

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 ongoing energy transition and open up further opportunities for the region." It added: "This purchase will bring new investments for the refinery."

What the acquisition could mean

The initial response in Schwedt was positive, albeit cautious. "I am pleased with this announcement, because it gives us clarity and planning security for the future of our PCK," explained PCK CEO Ralf Schairer. The Works Council added: "For us, it is important that Prax is acquiring the shares from a company that has an interest in securing the site and jobs."

The Federal Ministry of Economics and the state of Brandenburg expressed similar sentiments. "There is now planning security for PCK Schwedt," explained a spokesperson for the Federal Ministry. Brandenburg's Minister of Economic Affairs Jörg Steinbach (SPD) noted that Prax not only has experience with crude oil, but also operates hydrogen projects. "I see a positive development for Schwedt."

The hurdles

But there are still many unanswered questions. Shell stated that the deal is expected to be completed in the first half of 2024, "subject to the rights of the partners and regulatory approvals". The current shareholders in turn have a right of first refusal. In addition to Rosneft, this includes the minority shareholder 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, the German government. What will become of 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. After all, they do not belong to the state, it only manages them. For the time being, this runs until March 2024.