Shell BG Merger Gets Brazilian Clearance


Published Jul 24, 2015 7:29 PM by The Maritime Executive

Royal Dutch Shell has announced that its recommended combination with BG Group has received unconditional merger clearance from the Brazilian competition authority (CADE), satisfying the first of the pre?conditions to the combination. Other pre?conditions include merger clearances in Australia, China and Europe.

Commenting on CADE clearance Shell CEO, Ben van Beurden, said: “The addition of BG’s competitive deep water Brazil position to Shell’s global portfolio is one of the main strategic drivers for the combination. Securing CADE approval at this early stage is a significant deal milestone and reflects not only Shell’s thorough preparation but also the professionalism and efficiency of the Brazilian authorities.”

Following comments made in June, when the recommended combination cleared its first anti-trust hurdle in the United States, van Beurden also re?confirmed the filing process is well underway in the remaining pre?conditional and other jurisdictions, and the recommended combination remains on track to complete in early 2016. The pre?conditions and conditions to the combination are set out in the April 8 deal announcement.

Shell’s deal with BG Group to buy the UK-based company is worth £47 billion ($69.6 billion) in cash and shares.

Since taking over Shell in 2014, van Beurden had been trying to cut costs, and the deal is expected to enable the two oil and gas companies to reduce costs at a time when the industry is suffering from prolonged low oil prices.
Shell is one of the world’s largest energy producers, with a market value of about $192 billion.

Buying BG will add to Shell’s proven oil and gas reserves by 25 percent and to production by 20 percent, including BG’s offshore oil fields in Brazil’s Santos Basin, natural gas reserves in East Africa and the Queensland Curtis LNG project in Australia.

By applying its capabilities to BG’s assets, Shell believes that, by around 2020, the combined group will have two strategic growth businesses – deep water and integrated gas – that could potentially each generate $15-$20 billion in cash flow per annum. It will also have upstream and downstream capacity to generate a further combined $15-$20 billion in cash flow per annum.

With BG, Shell would be the leading foreign oil company in Brazil.

Shell is also expected to surpass Exxon as the world's largest publicly traded oil and gas producer by 2018, with output of 4.2 million barrels of oil equivalent per day.

Global LNG production was 246 million tons last year. The new Shell-BG group would have 18 percent of world output.