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Shell (RDS.A) to Shut Down its Louisiana Convent Refinery

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Royal Dutch Shell Plc.  announces shutdown of its Convent Refinery in South Louisiana due to slumping fuel demand as a consequence of the pandemic. The shutdown is expected to begin in mid-November after the oil giant’s unsuccessful attempt to find a viable buyer for the facility.

The decision is in sync with Shell’s plans of limiting the number of its operational refineries from 14 to 6 facilities by 2025 as part of the company’s strategy to move away from its primary activities into alternative energy. The remaining facilities will have integrated oil refineries and petrochemical plants.

Further, Shell plans to invest in a core set of integrated manufacturing sites for a carbon-neutral future. Per Shell, a further association of these core sites with Shell trading hubs along with the production of chemical substances and other products adaptable to a low-carbon situation bodes well.

The Convent facility, located alongside the Mississippi River, midway between Baton Rouge and New Orleans, has a refining capacity of 211,100 barrel-a-day with about 700 employees. Following the shutdown, Shell will prioritize its workers’ wellbeing by opening a selective voluntary severance program. This will enable workers to seek employment within and outside of Shell.

The decision was made amid refinery shutoffs in the United States by downstream service providers like Marathon Petroleum Corporation (MPC - Free Report) , PBF Energy (PBF - Free Report) and Phillips 66 (PSX - Free Report) .  While some facilities are being closed permanently, others will be transformed into renewable diesel plants due to the shrinking oil demand. On its part, Shell wants to reserve the refineries with petrochemical segments, including one in Louisiana and aims to become a net zero-emissions company for a low-carbon future.

Company Profile & Price Performance

Shell is one of the primary oil majors — a group of U.S. and Europe-based big energy multinationals — with global operations. The company is fully integrated, as it participates in every aspect related to energy — from oil production to refining and marketing.

Shell currently carries a Zacks Rank #3 (Hold). Its shares have outperformed the industry in the past three months. The company’s shares have lost 15.2% compared with the industry’s 20.4% decline.

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