Shell Sales Continue

Station activity in California, Illinois part of oil company's retail divestment

SCOTTS VALLEY, Calif. -- Larry's Shell in Scotts Valley, Calif., has been sold, part of Shell Oil Co.'s four-year strategy to transition retail assets to joint venture and wholesale operations, reported The Santa Cruz Sentinel. The new owner is Peninsula Petroleum, Redwood City, owned by M.J. Castelo and auto racers Mario and Michael Andretti. The company owns and operates gas station and convenience store facilities under the Shell brand in the Monterey, Calif., area.

Shell spokesperson Robin Lebovitz said the station will reopen in a few weeks and remain a Shell-branded [image-nocss] facility. The purchase price is confidential, she told the newspaper.

On Monday, the day the sale closed, the station shut down so workers could begin replacing the gas pumps and underground storage tanks. The work will take about a week, Jim Reed of Getter Ryan General Contractors, which was hired to do the job, told the paper.

The location is known to environmental regulators as one of the many locations in the county where a gasoline storage tank leaked, said the report. It has been monitored since 1993. In 1998, regulators found that MTBE (methyl tertiary butyl ether), a chemical additive that was supposed to reduce auto exhaust emissions, had contaminated groundwater in Scotts Valley. That same year, Shell Oil sold the station to subsidiary Equilon LLC for $388,000. The most recent county assessment for the property was $1.456 million, the report said.

Delta Consultants has been testing Scotts Valley groundwater on a quarterly basis for Shell, Chevron and Unocal/Tosco, all of which operated stations nearby. Remediation to deal with the "Camp Evers plume" has been ongoing, the report added.

Lebovitz said Shell retains responsibility for remediation activities related to its historic ownership and operation of the underground storage tanks.

Shell's strategy has led to the change from a direct-supplied to wholesaler-supplied fuel model and working with wholesale joint venture partners, which own and operate stations. "We have a number of wholesalers, both existing and new, who want to grow with Shell," Lebovitz said.

She said other Shell-branded sites are available for sale in the county, but she declined to identify them. Shell locations in the county include Santa Cruz, Freedom and Capitola.

Meanwhile, as previously reported in CSP Daily News earlier this week, Shell signed contracts to sell gas stations in the River North, Old Town, Lincoln Park and Lakeview areas of Chicago's North Side. The buyers are believed to be interested in converting the stations into nonfuel retail developments, the sources told Crain's Chicago Business. The deals are subject to financing and other contingencies. (Click here for previous coverage.)

The number of stations in Chicago declined 10% last year to 452, said the report. Other local Shell sites are being marketed to companies that would run them as convenience stores that sell gasoline. Shell said more than 100 area stations are being sold, mostly to these buyers.

Houston-based Shell is selling off its retail holdings by 2010. The company is continuing its plan to dissolve its multisite-operator (MSO) partnerships and to grow through the wholesale class of trade, including wholesaler joint ventures, transitioning more markets from direct-supplied to wholesale- or wholesale/joint-venture-supplied markets

"These sales are simply a part of our overall effort in selling our assets per our publicly announced intent in 2005 to transition company-owned assets to the wholesale class of trade in an effort to grow the Shell brand in the United States and improve the sustainability of the network," Shell spokesperson Karyn Leonardi-Cattolica told CSP Daily News. "These sales are consistent with our normal process for selling assets and transitioning markets."

Shell Oil Products US, a subsidiary of Shell Oil Co., has a network of approximately 6,100 branded gas stations in the western United States. Motiva-which operates the eastern and southeastern (including East Texas) U.S. refining and marketing businesses for Shell and Saudi Refining Inc. (SRI)-possesses a marketing network that supports approximately 7,700 Shell-branded stations.