LONDON (Reuters) - Royal Dutch Shell will hold on to its refining business despite shedding many underperforming downstream assets, its chief executive said on Tuesday.
The global refining sector has suffered over the past year from weak profit margins due to rising capacity and increasing competition and Shell’s downstream business has been a drag on its 2013 and first quarter 2014 results.
But Ben van Beurden said despite “unacceptable” returns the unit nonetheless benefited Shell’s overall performance.
“If you look at the oil products performance, indeed the returns are unacceptably low. To some extent it has to do with the very poor refining environment,” van Beurden told Shell’s annual general meeting in The Hague.
“Does that mean we may as well take a rather simple view and just spin off the entire downstream because that is indeed an area where we have quite a few of the underperforming assets? I don’t believe so.”
Shell has been reviewing its downstream assets alongside its involvement in U.S. shale assets as the two least performing areas in its global portfolio. It plans to divest $15 billion worth of assets in 2014/15 to improve profitability and payouts
But van Beurden insisted the company will hold on to the refining segment as part of an integrated model which he said, “although it is fundamentally different from what it was 50 years ago, is very well alive and very necessary and relevant.”
He added: “It doesn’t mean it is a safe haven for underperforming assets and what you have been seeing is a clear determination to take underperforming assets to task.”
Earlier this year, Shell announced it was divesting refining and marketing businesses in Australia, Italy, Denmark and Norway.
Reporting by Ron Bousso and Dmitry Zhdannikov; Editing by Sophie Walker