Shell Reportedly in Early Talks to Acquire BP
Energy behemoth Shell is said to be in initial talks to take over its UK competitor BP in what would be one of the biggest mergers of oil and gas companies in years. The deal could be worth more than $80 billion, comparable to the record-breaking Exxon-Mobil merger, the Wall Street Journal reported.
Although Shell and BP have not announced the negotiations officially, their market already responded. BP shares rose by 7–10% following the news, while Shell’s stock dipped modestly. Shell replied by labeling reports as “market speculation,” while BP has refused to comment publicly.
The logic for the merger is in market forces and strategic positioning. Shell, worth more than $200 billion, needs to increase its global presence in the face of growing competition from U.S. majors such as ExxonMobil and Chevron. BP, on its part, has come under pressure from shareholders, particularly since its lag behind other energy majors following a hasty transition to green energy. Activist investor Elliott Investment Management has also been said to have pushed BP to restructure or sell itself.
If completed, the merger would form the world’s largest private oil producer, with significant synergies in LNG, upstream operations, and energy trading. Potential cost savings of up to $2 billion per annum have been estimated by analysts. Yet, any such transaction would be subject to intense regulatory scrutiny in the U.K., U.S., and EU, particularly in the current climate-driven energy climate.
At this point, the discussions are only initial. Nevertheless, if they move forward, the Shell-BP merger has the potential to change the world energy map and redefine European oil leadership.
