• 18 mins WTI At 7-Month High On Supply Optimism, Kurdistan Referendum
  • 7 hours Permian Still Holds 60-70 Billion Barrels Of Recoverable Oil
  • 12 hours Petrobras Creditors Agree To $6.22 Billion Debt Swap
  • 16 hours Cracks Emerge In OPEC-Russia Oil Output Cut Pact
  • 20 hours Iran Calls On OPEC To Sway Libya, Nigeria To Join Cut
  • 21 hours Chevron To Invest $4B In Permian Production
  • 23 hours U.S.-Backed Forces Retake Syrian Conoco Gas Plant From ISIS
  • 1 day Iraq Says Shell May Not Quit Majnoon Oilfield
  • 3 days Nigerian Oil Output Below 1.8 Million BPD Quota
  • 4 days Colorado Landfills Contain Radioactive Substances From Oil Sector
  • 4 days Phillips 66 Partners To Buy Phillips 66 Assets In $2.4B Deal
  • 4 days Japan Court Slams Tepco With Fukushima Damages Bill
  • 4 days Oil Spills From Pipeline After Syria Army Retakes Oil Field From ISIS
  • 4 days Total Joins Chevron In Gulf Of Mexico Development
  • 4 days Goldman Chief Urges Riyadh To Get Vision 2030 Going
  • 4 days OPEC Talks End Without Recommendation On Output Cut Extension
  • 4 days Jamaican Refinery Expansion Stalls Due To Venezuela’s Financial Woes
  • 4 days India In Talks to Acquire 20 Percent Of UAE Oilfield
  • 5 days The Real Cause Of Peak Gasoline Demand
  • 5 days Hundreds Of Vertical Oil Wells Damaged By Horizontal Fracking
  • 5 days Oil Exempt In Fresh Sanctions On North Korea
  • 5 days Sudan, South Sudan Sign Deal To Boost Oil Output
  • 5 days Peruvian Villagers Shut Down 50 Oil Wells In Protest
  • 5 days Bay Area Sues Big Oil For Billions
  • 5 days Lukoil Looks To Sell Italian Refinery As Crimea Sanctions Intensify
  • 5 days Kurdistan’s Biggest Source Of Oil Funds
  • 6 days Oil Prices On Track For Largest Q3 Gain Since 2004
  • 6 days Reliance Plans To Boost Capacity Of World’s Biggest Oil Refinery
  • 6 days Saudi Aramco May Unveil Financials In Early 2018
  • 6 days Has The EIA Been Overestimating Oil Production?
  • 6 days Taiwan Cuts Off Fossil Fuels To North Korea
  • 6 days Clash In Oil-Rich South Sudan Region Kills At Least 25
  • 6 days Lebanon Passes Oil Taxation Law Ahead Of First Licensing Auction
  • 7 days India’s Oil Majors To Lift Borrowing To Cover Dividends, Capex
  • 7 days Gulf Keystone Plans Further Oil Output Increase In Kurdistan
  • 7 days Venezuela’s Crisis Deepens As Hurricane Approaches
  • 7 days Tension Rises In Oil-Rich Kurdistan
  • 7 days Petrobras To Issue $2B New Bonds, Exchange Shorter-Term Debt
  • 7 days Kuwait Faces New Oil Leak Near Ras al-Zour
  • 8 days Sonatrach Aims To Reform Algiers Energy Laws
The OPEC Deal: Why Iraq’s Words Matter

The OPEC Deal: Why Iraq’s Words Matter

Iraq’s oil minister has claimed…

Why Shell May Get Less Than It Bargained For In BG Deal

Royal Dutch Shell’s $70 billion purchase of BG Group may not be as attractive as it once seemed.

According to BG’s 2014 annual report, if British-based BG were to be taken over by another company, the government of Kazakhstan would have the right to buy BG’s 29.25 percent share in a valuable Kazakh gas field, which so far has represented some 15 percent of the company’s total production and 9 percent of the $19 billion in revenue it made last year.

There’s no word yet from Astana on what the Kazakh government plans to do with the Karachaganak field of gas condensate once the sale is closed next year. Its Energy Ministry said it had no information about the matter from either BG or Shell.

Related: Oil To Return To $80 With Or Without OPEC Cut Says Iranian Official

“Therefore currently the ministry has no update on the transaction and the existing agreements between the companies,” Uzakbai Karabalin, the first deputy energy minister of Kazakhstan, said in a statement.

Previously, the Central Asian country has chosen to keep its energy resources to itself in such circumstances. BG’s report says its share in the field doesn’t expire for another 22 years, unless BG is sold and Kazakhstan wants to reclaim Karachaganak.

A Shell spokeswoman told The Wall Street Journal that the Anglo-Dutch company expected to keep the field.

Related: $50 Billion Mega Project Could Change South America Forever

Karachaganak in northwestern Kazakhstan is believed to be one of the world’s largest such gas fields, containing an estimated 48 trillion cubic feet of gas and 9 billion barrels of condensate. According to the BG annual report, no more than 10 percent of its reserves have been extracted so far. BG also produced about 85,000 barrels per day of oil equivalent from the well.

The Kazakh field isn’t the only potential headache arising from Shell’s acquisition of BG. When it announced the merger plans more than a month ago, it said its primary interest was BG’s gas holdings in Brazil. In particular it cited two areas, or “blocks,” of energy exploration, named BM-S-9 and BM-S-11. They’re estimated to be worth virtually the entire value of the company’s assets in Brazil.

Related: Oil Markets Indifferent To Latest ISIS Victory In Iraq

Yet one of those blocks also is at risk because of the merger. BG’s annual report said, “In certain specific circumstances, it is possible that BG Group’s partners in BM-S-9 [Petrobras and Repsol Sinopec Brasil] have a right of first refusal to acquire BG Group’s interest … in the event of a change of control of BG Group plc.”

Neither BG nor Shell would comment on the rights to BM-S-9, which contains the valuable Sapinhoa and Lapa blocks.

Energy analysts interviewed by Reuters said losing the Karachaganak field might not have much of an effect on the plans of a merged Shell and BG, but losing the Brazilian block would hurt. “Brazil is central to the acquisition,” said one analyst, Neill Morton at the London financial services group Investec. “Sapinhoa is pretty important. It’s one that Shell is looking to get its hands on.”

By Andy Tully of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment
  • Karl Yong on May 20 2015 said:
    It seem that all the analysts seem to miss including PetroChina in their M&A equation. PetroChina has became the biggest player in the oil industry, thank to the hedge funds and investment bank, like GS, in shorting the price of the oil players in the west. Effective a serious takeover of BP and even Chevron become a distinct possibility.

    PetroChina buying BP make the most sense for the following reason:-
    1) access to oil source and drill sites.
    2) technology both in exploration and down stream in refinery.
    3) a well established market reach.

    Chinese had demonstrated to be the best partner to the European companies when they takeover Volvo. Since Geely takeover, Volvo had grew from strength to strength, to the point of setting factory in America! Isn't it an ironic, companies like Nike miked cheap Asia labor and sacked all their US factories staff, Chinese will be hiring US labor to make car! While takeover by their western rival, typically mean replacement or sacking of management, engineers and labor force. Geely embraced all of them and Volvo grew to be much stronger.

    Therefore, maybe being takeover by PetroChina isn't going to be a bad idea compare to Shell or Exxon.

Leave a comment

Oilprice - The No. 1 Source for Oil & Energy News