Royal Dutch Shell plc RDS.A recently agreed to divest its coal gasification technology business and patent portfolio for liquids gasification to Air Products and Chemicals, Inc. APD.
The company is an industrial gas provider. The financial terms of the deal, which will close in the upcoming months, are yet to be disclosed.
The technology being sold is clean, efficient and reliable and is used to convert low-value refinery residues and asphaltenes into synthesis gas or syngas. Moreover, Shell also established a strategic alliance with Air Products with the target to render solutions to the liquids gasification market. The solution range incorporates engineering, procurement, construction activities, plant operations and technology licensing.
As far as Air Products is concerned, the deal will enable it to increase its capacity to generate syngas for the ongoing and future projects in hand. The company has plans to develop a coal-to-syngas production facility of $3.5 billion in Yulin City of Shaanxi Province in China. Moreover, Air Products created a joint venture in September 2017 with a Chinese coal mining company to supply syngas for 20 years.
What Led to the Move?
The divestment is in line with Shell’s strategy to get rid of debt stemming from its $50 billion acquisition of BG Group. The move will also help the company to upgrade and streamline its portfolio.
Notably, the company has already divested more than $23 billion worth of its assets as part of its plan to divest assets worth $30 billion in the 2016-2018 time period. Additionally, Shell intends to divest more than $10 billion worth of assets in the 2019-2020 time period. We would like to remind investors that as of Sep 30, 2017, Shell had around $80 billion in long-term debt.
Its debt-to-capital ratio was 25.4%, which the company intends to reduce to 20% with the help of its divestment programs and operational efficiency.