Shell to Sell Fuel Stations in Malaysia?

It was reported by Reuters that energy giant Shell is in talks with Saudi Arabia's state-owned Saudi Aramco to sell its fuel station business in Malaysia. Shell has the second-largest such network in the country. The deal could be worth up to $1 billion.

Shell, however, said Malaysia is important to them. London-based Shell wholly owns around 950 fuel stations across the Malaysia, according to its website, with only Malaysia's state-owned Petronas operating a bigger network. Talks began in late 2023 and a deal may be finalised in the coming months. The potential deal size is at roughly 4 billion to 5 billion ringgit ($844 million to $1.06 billion).

Source: https://en.wikipedia.org

In addition to its fuel stations, Shell sells industrial lubricants, produces crude oil and natural gas offshore of Sarawak and Sabah states, and is a joint venture partner in two liquefied natural gas (LNG) ventures.

The sale is part of the CEO’s efforts to focus the company's operations on the most profitable businesses. Shell has said it would look to divest 500 fuel stations this year and next. It is in the process of selling its Singapore refinery and petrochemical complex. Shell's effort to sell its Malaysia fuel stations is consistent with its move to sell its refinery on Bukom Island in Singapore, which supplies the network.

Saudi Aramco does not have fuel stations in Malaysia, although it owns 50% of the 300,000-barrel per day (bpd) Pengerang refinery in Johor in a joint venture with Petronas, which sells fuel domestically and for export.

Aramco operates petrol stations in Saudi Arabia and also operates fuel stations elsewhere in joint ventures with French major TotalEnergies, and South Korea's S-Oil Corp.

In early 2024 Shell had said it plans to sell 1,000 fuel stations by 2025. Upgrading retail network, with expanded electric vehicle charging and convenience offers was in response to changing customer needs. In total, Shell had said it plans to divest around 500 Shell-owned sites (including joint ventures) a year in 2024 and 2025.

Exit of Shell, Exxon, Goodyear, Citibank and others does not speak well for Malaysia. Though we gain from other FDIs, it is necessary to understand the reasons for their exit, so that we could re-shape our incentives to retain FDIs in Malaysia.

References:

Exclusive: Shell in talks to sell Malaysia fuel stations to Saudi Aramco, sources say, Trixie Sher Li Yap, Yantoultra Ngui and Ron Bousso, Reuters, 7 May 2024

Shell says committed to Malaysian retail amid purported Aramco bid, Jov Onsat, www.rigzone.com, 9 May 2024