Home' Trinidad and Tobago Guardian : April 9th 2015 Contents A19
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LONDON---Oil and gas company Shell has
agreed to buy British rival BG Group for
£47 billion (US$69.7 billion), in a deal that
may signal a new wave of mega-mergers
as the energy industry tries to adapt to
Royal Dutch Shell said yesterday it will
pay the equivalent of £13.67 in cash and
stock for each share of BG Group, 50 per
cent more than Tuesday s closing price. The
deal will boost Shell s oil and gas reserves
by 25 per cent, including offshore projects
in Australia and Brazil, and give it a bigger
presence in the fast-growing liquefied natural
gas (LNG) market, Shell said.
Other energy giants may follow suit as
they look to boost growth through acqui-
sitions after increased production in the US
helped trigger a plunge in oil prices. The
last wave of oil mergers took place in the
1990s after new production from the North
Sea, Alaska and Mexico led to excess global
capacity and companies linked up to protect
themselves, or bought weaker rivals at lower
"Will this be the opening shot in a new
wave of mega-mergers like the 1990s?"
asked Christian Stadler, associate professor
of strategic management at Warwick Busi-
ness School in Britain. "Quite a few oil com-
panies are under cost pressure with no sense
of the oil price recovering. Companies had
got used to US$100 a barrel, and many need
US$40 to US$60 to break even so we could
see more of these deals."
The international price of crude oil has
plunged from over US$115 a barrel last sum-
mer to a low around US$45 before recovering
somewhat in recent weeks to trade at US$58
a barrel on Wednesday. Global natural gas
prices have also dropped, because most of
the natural gas traded internationally is
linked to the price of oil.
Analysts at Wood Mackenzie say low
prices have prompted most major oil com-
panies to weigh acquisitions, though only
a few have the size and resources to pull
off a mega-merger. "If you re looking to the
next big deal, ExxonMobil stands out as
most likely to pull the trigger," they wrote
in a research note.
Exxon made the last giant oil and gas
acquisition when it agreed to buy the US
shale driller XTO Energy for US$31 billion
The takeover of BG Group allows Shell
to replace reserves at a time when explo-
ration budgets are being cut and after its
attempts to join the US shale boom did not
amount to much, Stadler said.
Wood Mackenzie said BG s large position
in the deep waters off of Brazil were likely
the most attractive target for Shell. "It s all
about the deepwater oil," analysts wrote.
The merger also combines the two largest
investor-owned sellers of liquefied natural
gas in the world. As new projects come on
line in the coming years, the combined com-
pany will become the world s biggest seller
of liquefied natural gas by 2018, Wood
The boards of both companies recom-
mended that shareholders approve the deal,
which they say will create a more compet-
itive, stronger company amid the volatility
in oil prices.
Shareholders seemed to think that Shell
did not get much of a discount for BG, how-
ever, despite the low oil and gas prices.
Shares in Shell were down about 7 per cent
Wednesday while those in BG Group soared
32 per cent.
BG shareholders will own about 19 per
cent of Shell after the deal is complete.
Combining the two companies will pro-
duce savings of about £2.5 billion a year,
"This an incredibly exciting moment for
Shell," chief executive Ben van Beurden told
reporters. "It is bold and strategic moves
that shape our industry."
BG s Norwegian CEO Helge Lund was
conspicuously absent from Wednesday s
press conference. Organisers said he
remained at BG headquarters in Reading---
a two-hour drive from London---to handle
internal communication with the company s
workforce. He will stay with BG only until
the deal is completed.
He said in a statement that BG would
benefit from the takeover.
"BG s deep water positions and strengths
in exploration, liquefaction, and LNG ship-
ping and marketing will combine well with
Shell s scale, development expertise and
financial strength," he said. (AP)
US$70 b mega merger
Shell to take over BG Group
Although the proposed acquisition of BG is
still in its early stages, the Energy Chamber of
T&T is hoping there will be careful consideration
of the the local assets of the two companies.
The Chamber said the current low commodity
price environment has led to new opportunities
for mergers and acquisitions amongthe major oil
and gas companies.
"The proposed Shell acquisition of BG is in its
preliminary stages and still requires regulatory
and shareholder approvals," the Chamber said in
a statement yesterday.
"Nevertheless, our expectation would be that
the assets in Trinidad & Tobago would be one of
the important factors taken into consideration in
the deal. BG is Trinidad & Tobago s second biggest
gas producer and shareholder in the Atlantic LNG
facility. Shell is also a shareholder in Atlantic,
having purchased Repsol s interest in 2013. Shell,
BG, Repsol and Atlantic are all important members
of the Energy Chamber of Trinidad & Tobago."
BG Group is a key gas producer in T&T, oper-
ating since 1989. It supplies around one-third of
its gas production to the domestic market, with
the balance supplied to Atlantic LNG for export.
The company also has upstream operations off-
shore Trinidad s east and north coasts, an onshore
Central Block, and equity in all four trains at
Shell Trinidad Ltd. operates as a subsidiary of
Royal Dutch Shell plc. The company has been in
T&T for more than 100 years and is currently
engaged in the lubricant business with a lubricant
blending plant with state-of-the-art technology.
Shell also has an interest in Atlantic LNG as a
non-operating partner of one of the world s largest
liquefied natural gas producers. In addition, Shell
Global Solutions provides technical services to
the state-owned Petrotrin.
Royal Dutch Shell s US$70 billion purchase of
Britain s BG Group will make the energy giant the
biggest global producer of liquefied natural gas
I(LNG), a fast-growing market expected to boom
as developing countries and industrial energy
users convert from coal and oil.
Shell, already a leader in LNG for shipping and
transport, will meld BG s gas reserves, including
assets in Australia, Brazil and Africa. That will
increase its overall crude oil and natural gas reserves
by 25 per cent and 20 per cent, adding to its pro-
The mega-merger, one of the biggest in the
energy sector in over a decade, comes amid a
slump in oil and natural gas prices, and could
ignite a flurry of industry mergers.
BG was created in 1997 when British Gas split
into two separate companies. Last year, BG moved
its LNG trading business to Singapore from Lon-
don, a move that could cut its annual taxes by
HAVANA---The Cuban government
says it will start publishing classified
ads in print and online, entering a
vibrant informal marketplace where
Cubans can find everything from
houses to pirated US television pro-
Cubans frustrated by their ability to
obtain high-quality products from
state-run businesses at affordable prices
frequently consult a range of new web-
sites and privately run pamphlets used
by licensed and black-market entre-
preneurs to sell a startling variety of
goods and services.
Most of the publications have started
in the last five years as government
reforms have permitted the growth of
a small private sector on the commu-
The state-run National Information
Agency said that a website called Ofer-
tas, or Offers, and a 16-page colour
magazine with an initial run of 60,000
copies will be available next month.
Cuba launches official classified ads
Ben van Beurden,
CEO of Royal Dutch
Shell, left, shakes
hands with the
chairman GB group
Andrew Gould during
a press conference
to announce that
Royal Dutch Shell
has agreed to buy
British Gas in
London. AP PHOTO
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