Shell sees BG deal working despite low oil price

Shell said on Tuesday that its US$70 billion bid for BG will still work with oil prices in the mid-$60s a barrel as it expects higher synergies.

“Shell has been able to de-risk its initial synergy estimates and increase the expected level of identified and reported on pre-tax synergies from $2.5 billion to $3.5 billion in 2018, an increase of 40% compared to earlier guidance,” CEO Ben van Beurden said in a statement ahead of the company’s ‘management day’ in London.

Shell, which last week posted a huge quarterly loss, plans a 10% reduction in operating costs and 20% reduction in capital spending in 2015, together totalling $11 billion.

To manage through the current oil price downturn, the company also announced $20 billion in asset sales for 2014-15 and a further $30 billion planned for 2016-18, post completion of the BG offer.

Beurden said in the statement that Shell remains on track to complete the recommended combination with BG in early 2016. The deal would create one the world’s largest LNG players.

“We have received regulatory approvals from the EU, Brazil CADE, US FTC and other jurisdictions. Preconditional filing processes remain on track in Australia and China.”