Shell plans to convert its Montreal refinery into a storage centre for gasoline, diesel and aviation fuels. (Paul Chiasson/Canadian Press)

Shell Canada rejected a $420-million offer that would have kept its east-end Montreal oil refinery open and saved hundreds of jobs, CBC's sister network has learned.

The Israeli conglomerate Delek offered the sum for Shell's refinery, the company's largest in Canada, as well as all of its Quebec and Maritimes gas stations, Radio-Canada reported.

Delek keenly sought the Montreal plant and raised its bid twice, from $75 million to $150 million, and finally $200 million for the refinery alone, plus $220 million for the gas stations.

But Shell held out for $500 million and rejected Delek's offer, upsetting the Israeli company and the provincial government, sources told Radio-Canada.

Shell Canada announced in early June that it would close the 76-year-old refinery by the end of this summer, and turn it into a petroleum storage and distribution facility, a transformation that would shed more than 500 jobs.

It revised its plans two weeks later, saying a previously rejected potential buyer was back in talks to purchase the plant, which processes 130,000 barrels of oil a day.

Third-party valuators have pegged the refinery's worth at between $120 million and $160 million. Besides the offered price, Shell said it had to factor in the fact that the location is a profitable distribution centre for its products.

'Completely false'

Michel Arsenault, president of the Quebec Federation of Labour (commonly known by its French initials, FTQ), said Shell misled its employees as well as several levels of government.

"Shell had said that if there was a serious buyer for its facilities, it would sell. We have a serious buyer, we have a serious price," Arsenault said. "And now, Shell maintains that the buyer backed out, which is completely false."

A committee led by former senator Michael Fortier, working on behalf of the local business community, had been trying to find a buyer for the refinery.

Shell Canada is a unit of Royal Dutch Shell Group, the British-Dutch energy giant that is one of the world's biggest oil and gas companies.

With files from The Canadian Press