Essar Energy has entered into an association with Shell’s refinery. It has been decided that Essar Energy will buy Shell’s refinery at Stanlow, on the south bank of the Manchester Ship Canal near Ellesmere Port in Cheshire.

But in case the energy company decided to back out of the acquisition, it will be liable to pay a break fee of $50 m and if Essar proceed with the buying but Shell decided not to proceed with the offer, it will be liable to pay $10m fee. Shell will be given three days time to decide whether to accept the proposal or reject it.

Both have signed the exclusive agreement on Friday. This acquisition will mark Shell’s final departure from the UK’s refining market.

It is expected that future of the UK’s second-largest refinery should be settled by early April.

Essar has the deadline of March 31 to decide that it want to proceed with the association or wished to back out.

However Essar strongly believes that Stanlow’s performance could be significantly improved. Ynder Shells’s ownership, the refinery has been processing about 220,000 barrels a day, or 25 per cent below its maximum capacity of 296,000.

If Essar’s purchase for $350m (£215m) goes ahead, it will mark Shell’s final departure from the UK’s refining market. Essar will purchase Stanlow for $350m which it believes is a favorable deal.