Royal Dutch Shell has struck the energy industry’s biggest deal in more than a decade by agreeing to buy BG Group for 47 billion pounds ($70 billion), making Europe’s largest oil company the pre-eminent player in global natural gas and adding fields in Brazil.
Falling barrel price was always likely to spark wave of acquisitions and mergers which could rival the mega-takeovers of the late 1990s.
Royal Dutch Shell’s agreed takeover of BG sent shares of other oil and gas companies up on Wednesday as investors bet that there would be further moves by big companies to snap up smaller competitors.
The last round of energy industry takeovers was in the late 1990s when new production in the North Sea, Alaska and Mexico caused the oil price to collapse. In response, BP bought Amoco and Arco, Exxon snapped up Mobil to form the world’s biggest oil company and Chevron merged with Texaco.
The merged company, led by Shell Chief Executive Officer Ben van Beurden, 56, will boast a market value twice the size of BP and surpass Chevron. Shell, struggling to rebound from its worst production performance in 17 years, will swell its oil and natural gas reserves by 28 percent with the combination and inherit a management team that carved out a unique niche in liquefied natural gas, or LNG.
Buying BG also brings Shell a share in Brazil’s largest deepwater fields, consolidates its position in Australia’s gas industry and allows more participation in the U.S.’s emergence as a LNG exporter.