• 4 minute Hey Oil Bulls - How Long Till Increasing Oil Prices and Strengthening Dollar Start Killing Demand in Developing Countries?
  • 8 minutes Could oil demand collapse rapidly? Yup, sure could.
  • 15 minutes Oil and Trade War
  • 42 mins Could oil demand collapse rapidly? Yup, sure could.
  • 8 hours Migrants: Italy Wants EU Border Agency In Africa, Not At Sea
  • 5 hours Are EVs Safer Than Combustion Engine Vehicles?
  • 1 hour What If Canada Had Wind and Not Oilsands?
  • 4 hours WE Solutions plans to print cars
  • 4 hours Russia, Saudi Push For Big Hike In Oil Output Despite Iran Opposition
  • 4 hours Oil prices going down
  • 9 hours Nopec Sherman act legislation
  • 15 hours Sabotage at Tesla
  • 8 hours Sell out now or hold on?
  • 13 hours China & India in talks to form anti-OPEC
  • 3 hours Australia mulls LNG import
  • 11 hours The Irrelevance Of BTU Rating - Big Oil's Gimmick To Hoodwink The Public
  • 11 hours After Three Decade Macedonia End Dispute With Greece, new name: the Republic of Northern Macedonia
  • 3 hours Oil and Trade War
  • 10 hours Trump Hits China With Tariffs On $50 Billion Of Goods
China’s Oil Demand Could Take A Big Hit

China’s Oil Demand Could Take A Big Hit

In the last three years…

Oil Demand Growth Could Start To Soften Soon

Oil Demand Growth Could Start To Soften Soon

Non-OECD markets are one of…

Shell-BG Merger Clears First Regulatory Hurdle

The U.S. Federal Trade Commission has given its approval to Royal Dutch Shell’s plan to buy BG Group, the first but perhaps one of the most important of several regulatory hurdles the merger needs to become final.

The two companies hope to close the sale by early 2016, but it still needs approval from other countries where BG already does business, including Australia, Brazil, China and countries in the European Union. Nevertheless, Shell CEO Ben van Beurden is confident those clearances will come quickly.

Related: How Much Energy Does The Super Bowl Use?

“We’re well underway with the anti-trust and regulatory filing processes in relevant jurisdictions around the world, and we’re confident that, following the usual thorough and professional review by the relevant authorities, the deal will receive the necessary approvals,” van Beurden said in a statement on June 16. “We remain on track for completion in early 2016.”

Shell, the Anglo-Dutch oil major, and BG, a British gas company, agreed in April to the $70 billion merger. Both sides say the sale will allow the combined company to shed many redundant operations, which Shell expects will save a total of $30 billion by 2018.

Saving money has become the mantra for the global energy industry since the price of oil began to plummet in June 2014 from an average high of around $115 per barrel to below $60 by the end of the year.

Related: Peak Oil: Myth Or Coming Reality?

Many companies are postponing and even scrapping expensive projects, as well as shedding assets and jobs. Most recently, on June 16, Norway’s Statoil announced that it would be eliminating about 2,000 full- and part-time jobs by the end of 2016 to cut costs.

Cost savings aside, though, because of its very size, Shell is expected to benefit mightily from the merger, even by spending $70 billion on BG, a mid-sized company whose stock lost 20 percent of its value during the slump in energy prices. Shell’s stock lost only 10 percent during that period, in part because it was somewhat insulated by its size and wealth.

Shell also showed that it was aware that energy demand is beginning to shift from oil and coal, which emit large amounts of carbon, to gas, which burns more cleanly. But developing gas production facilities can be expensive and risky.

Related: The Dark Side Of The Shale Bust

Enter BG, whose specialty is gas and has some of the largest liquid natural gas (LNG) projects in the world. Once the deal is closed, Shell's $70 billion will have bought already-developed LNG and other gas facilities in countries around the world, including Australia, Brazil, East Africa, Egypt and Kazakhstan.

Certainly Shell could have survived the current depression in oil prices without buying BG. But through the merger, Shell not only saves money, it also acquires a large, functioning gas business – all without spending a penny on exploration and development.

By Andy Tully Of Oilprice.com

More Top Reads From Oilprice.com:



Join the discussion | Back to homepage

Leave a comment

Leave a comment

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