London-listed Essar Energy on Friday said it had entered into exclusivity agreement with Royal Dutch Shell to buy the latter's Stanlow refinery in the U.K. for about $350 million.

Stanlow is the U.K.'s second biggest refinery and now processes about 2.20 lakh barrels of oil a day.

The buyout is expected to increase its current refinery production by about two thirds, Essar Energy in a statement said.

Essar Energy has entered into exclusivity agreement with Shell UK Ltd. for the deal, which is expected to complete in the second half of 2011. “Shell has granted Essar Energy exclusivity in relation to the acquisition until April 1, whereby Essar Energy has the option until March 31, 2011, to enter into an asset purchase agreement,” the statement said.

Essar Energy would pay a break up fee of $50 million, if it does not proceed with the deal by March 31.

On the other hand, if Shell elects not to proceed and does not execute the asset purchase agreement within that period, it will pay Essar Energy a break fee of $10 million.

“Stanlow also fits well with our strategy of providing options for the export of high quality products from our Vadinar refinery in India,” Essar Energy CEO Naresh Nayyar said.

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