Royal Dutch Shell plc (RDS.A) announced the construction of a major new lubricants blending plant, the first to be built by an international oil company in Russia.
The plant will be located in Torzhok in the Tver region, northwest of Moscow, and have a capacity of 200 million liters a year (about 180,000 tons), making it one of the largest in the Shell network worldwide. It is expected to be online by the end of 2010.
Being the third largest lubricants market in the world, Russia is a country of strategic importance for Shell. Shell Lubricants has experienced a significant growth in the country in the past few years. The construction of the plant will help the company to capitalize on further growth opportunities.
In terms of assets, Royal Dutch Shell owns a strong and diversified portfolio of global energy businesses that offers attractive long-term growth opportunities. The company is actively managing and repositioning this portfolio by divesting non-core assets and stepping up capital expenditures to produce organic growth. The construction of the plant is further evidence in this direction.
While the current strategy to undertake major investments in organic growth projects is a step in the right direction, it remains to be seen how the company moves toward the stated goal of achieving top-quartile performance. Our Neutral rating for the stock remains unchanged.
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