* Vitol to keep refinery open, says can run profitably
* Abu Dhabi sovereign wealth fund to take stake
* Deal helps Shell toward $15 bln asset sales target
By Byron Kaye and Florence Tan
SYDNEY/SINGAPORE, Feb 21 (Reuters) - Top global oil traderVitol SA is buying Royal Dutch Shell's Australian refinery and petrol stations for about $2.6 billionin its biggest acquisition, looking to grab a share of a growingoil product market.
The purchase will pit Swiss-based Vitol against arch rivalTrafigura, which became Australia's largestindependent fuel retailer last year in a market where the lessnimble oil majors are looking to cut losses.
Australia has become one of Asia's biggest fuel importers,creating opportunities for traders as the majors have shutolder, small refineries, under pressure to shift investment tooil and gas production that generates better returns.
The Australian deal puts Shell comfortably on track to hitits target of $15 billion in asset sales over the next twoyears, set by new chief executive Ben van Beurden as part of anausterity drive following a profit warning in January.
So far this year, Shell has sold about $5 billion of assetsand analysts said the swift pace of disposals could prompt thecompany to raise its target.
"The speed at which Shell can sell relatively immaterialassets for billions of dollars highlights how unambitious its$15 billion programme is. We would expect the disposal target tobe raised in due course," Investec analysts said.
Vitol Chief Executive Ian Taylor said he expects to makegood returns from the business eventually, as the refinery,while small, was a high-quality plant, with good distributionchains into the Australian market.
Analysts said the acquisition made sense for Vitol eventhough Shell couldn't run it profitably enough to keep it.
"These two companies have different return expectations andtargets they're willing to accept," said Craig Pirrong,Professor of Finance at the University of Houston.
With the Australian purchase, which includes 870 servicestations plus Shell's bulk fuels, bitumen and chemicalsbusinesses, Vitol is betting Australian fuel demand willcontinue to grow faster than in Europe, and eventually the worldwill be short of refining capacity.
"Longer term, yes, we are making a bet that refining willactually be a cyclically good business. And that's what we'vefound so far, by the way," Taylor told reporters in Melbourne,hours after signing the deal at the refinery in nearby Geelong.
It was also attracted to the country as it has a freemarket, in contrast to other places in Asia where oil productprices are heavily controlled, Taylor said.
He said Vitol would not be interested in a stake in theretail business China's Sinopec Corp has put up forsale.
Shares in Shell traded up 0.2 percent at 1132 GMT, in linewith Britain's bluechip index.
HOTBED FOR TRADERS
Dutch-owned Vitol has refining operations in the United ArabEmirates and Antwerp, and formed a joint venture with privateequity firm Carlyle Group in December called Varo Energyto own refining and distribution assets in Switzerland andGermany.
Taylor confirmed that the Abu Dhabi Investment Councilsovereign fund was part of the group that bought the assets, butdeclined to name other parties who may take an equity stake inthe deal, which is expected to be partly debt funded.
Vitol joined the race for the Australian petrol stationsafter Trafigura's Puma Energy arm bought two fuel distributorslast year.
Others eyeing the market include South Korean refiner S-Oil, which said last month it was in exclusive talks tobuy a stake in Australia's United Petroleum, a privately ownedbusiness valued at about A$1 billion, including debt, thatreceived a number of approaches from international companiesfollowing Puma's takeover of Ausfuel.
Australia's refineries, owned by Shell, BP,ExxonMobil and Caltex, have mostly bookedlosses over several years as tighter fuel quality standards andmega-refineries in Asia have made them uncompetitive.
Rather than spend money on upgrading plants, the majors havebeen looking to sell them or turn them into fuel importterminals. Taylor said Australia was likely to need more fuelterminals in the long run, an opportunity Vitol would look at.
SELL-OFF
Shell, which retains substantial gas interests in Australiaas well as a $7 billion stake in Woodside Petroleum,was making tough choices to improve its overall competitiveness,CEO van Beurden said in a statement.
Analysts and bankers say Shell may consider selling its 23.1 percent stake in Woodside to help meet its $15 billiondisposal target, which equates to about 6 percent of Shell's market value.
The company generated $1.7 billion of divestment proceedslast year.
Earlier this week, Shell offloaded its Italian retailbusiness for an undisclosed price, reported in the Italian pressas to 500 million euros. In January, it also sold a stake in agas project in Western Australia for $1.1 billion and a stake ina Brazilian oil project for $1 billion.
It has already sold downstream assets including refineriesin the UK, Germany, France, Norway and the Czech Republic.
"The new (Shell) management is being ruthless in cutting outanything that they think is extraneous to their core," said AlTroner, President of Asia Pacific Energy Consulting in Houston.
