Shell's Mega-Merger in Brazil

 

Royal Dutch Shell got Brazilian government approval to buy rival BG in a $70 billion acquisition. The proposed mega deal will be the largest since Exxon bought Mobil oil in 1998 and the 2004 merger between Royal Dutch Petroleum and Shell Transport and Trading.

Brazil’s Council for Economic Defence (CADE) gave approval without restrictions and if no appeals lodged during the next 15 days the deal will become final. The acquistion of BG  would make Shell the largest foreign operator in Brazil. the Federal Trade Commission has already given the green light, but pre-conditional approvals are still pending from the European Union, Australia and China.

In May, Shell and BG produced a combined 212,252 BOE per day in Brazil, which accounted for about 7.1 percent of the country's total. Experts anticipate that Shell’s production will double to nearly 500,000 by 2020. Currently, BG owns 25 percent of the Lula field and Shell operates 20 percent of the Libra fields.

The mega-merger comes as Petrobras, the Brazil's state-run oil company, is bogged down in a massive corruption scandal as wells as dealing with a huge debt load and low global oil prices. Meanwhile, the scandal has led to 23 service companies having payments frozen and the companies banned from bidding on future oil and gas projects in the country. The Brazilian economy is also suffering from largest recession in nearly a quarter century.