Royal Dutch Shell has agreed to sell its downstream business in Argentina to Brazilian ethanol producer Raízen for $950m.

The sale is part of Shell’s strategy to optimize its portfolio through a $30bn divestment program. It also follows a strategic review initiated by the company for the Argentine downstream business in August 2016.

As part of the transaction, Raízen will acquire Shell’s Buenos Aires Refinery, about 645 retail stations, liquefied petroleum gas, marine fuels, aviation fuels, bitumen, chemicals and lubricants businesses. In addition to these, the ethanol producer will also acquire the supply and distribution operations of Shell in Argentina.

The transaction does not feature the upstream interests of Shell in the Vaca Muerta shale formation. Shell said that there is a substantial long-term growth potential in the shale resources in Argentina.

Raízen, which currently has a turnover of about $24bn per year, is a 50:50 joint venture formed by Shell and Cosan in 2011 to produce ethanol. Currently, Raízen is a biofuels producer and fuels distributor in Brazil, where it handles over 6,000 Shell service stations.

Following the completion of its transaction with Shell, the businesses bought by Raízen will continue their relationships with the oil and gas major under various commercial agreements, estimated to be around $300m. Put together, the businesses acquired by the ethanol producer in Argentina have annual revenue of $3.3bn, reported Reuters.

Shell downstream director John Abbott said: “We plan to continue thriving in Argentina’s downstream market through Raízen.

“Raízen has already delivered significant value for us in Brazil and we will remain an important fuel supplier to Argentina under this deal.”

Shell said that Raízen was selected as the buyer of its Argentine downstream business through a competitive bidding process where the Brazilian biofuel producer had prevailed over Argentina’s YPF, China’s Quinenco and Petrochina.

The sale of the business is slated to be completed later this year and is expected to boost a regional partnership between Shell and Cosan.