BREAKING: Shell, BG forming LNG colossus

Two of the world’s largest LNG players, Royal Dutch Shell and BG Group of UK, are about to reshape the global LNG industry.

“The Boards of Shell and BG have reached an agreement on the terms of a recommended cash and share offer to be made by Shell for the entire issued and to be issued share capital of BG,” the two energy giants said in a statement on Wednesday.

According to the statement, Shell will buy BG Group for approximately £47 billion in cash and stock. The Combination will result in BG Shareholders owning approximately 19% of the Combined Group, the statement said.

The deal will add some 25% to Shell’s proved oil and gas reserves and 20% to production, each on a 2014 basis, and provide Shell with enhanced positions in competitive new oil and gas projects, particularly in Australia LNG and Brazil deep water.

“Bold, strategic moves shape our industry. BG and Shell are a great fit. This transaction fits with our strategy and our read on the industry landscape around us. 

BG will accelerate Shell’s financial growth strategy, particularly in deep water and liquefied natural gas: two of Shell’s growth priorities and areas where the company is lready one of the industry leaders. Furthermore, the addition of BG’s competitive natural gas positions makes strategic sense, ahead of the long-term growth in demand we see for this cleaner-burning fuel,” Ben van Beurden, CEO of Shell said.

“This transaction will be a springboard for a faster rate of portfolio change, particularly in exploration and other long term plays. We will be concentrating on fewer themes, and at a larger scale, to drive profitability and balance risk, and unlock more value from the combined portfolios. Over time, the combination will enhance our free cash flow potential, and our capacity to undertake share buybacks, where I expect to see a substantial increase in pace,” Beurden added.

BG has a large global LNG portfolio with multiple production sources around the world, including Egypt, Trinidad and Australia. The company has also several projects under development in the US Gulf coast, Canada’s west coast and East Africa. Its fleet includes around 25 owned and leased LNG carriers – one of the largest in the world.

Shell has more than 40 owned or leased LNG tankers and the energy giant is linked to around one-third of the world’s LNG carrier operations. Among other, Shell is building the giant Prelude floating liquefaction vessel which will be located offshore Western Australia.

LNG World News Staff