With its £47 billion (€64.6bn) purchase of BG Group, Royal Dutch Shell has consolidated its position as a leading liquefied natural gas player.
But along with BG's gas operation in Australia, the main attraction the UK company held for its larger Anglo-Dutch peer was its stake in several giant Brazilian fields which rank among the biggest oil finds anywhere in recent decades.
The steep ramp-up in production at these offshore fields will help Shell pass out US behemoth Exxon within three years to become the world's largest international oil company, say analysts.
Corruption scandal
The deal is also a welcome vote of confidence in Brazil’s energy sector which has been battered by a corruption scandal in
Petrobras
and seen the financial viability of some of its recent finds called into question by the plunge in the oil price. Once the acquisition is approved by shareholders and regulators in various countries Shell will become the leading foreign oil company in
Brazil
and behind only state-controlled giant Petrobras in terms of production volume, with BG’s assets there set to become a key driver of production growth for the merged company.
BG already produces 144,000 barrels a day in Brazil, but this is expected to rise rapidly to 557,000 barrels a day by 2020. It is this growth, according to researchers at investment bank Jefferies, which will help turn Royal Dutch Shell into the world’s largest publicly traded oil and gas producer by 2018 with 4.2 million barrels a day, surpassing Exxon.
The pick of BG’s Brazilian assets are stakes in five ultra-deep offshore fields in the Santos basin operated by Petrobras, including a 25 per cent share in the giant Lula field which contains up to eight billion barrels.
Operationally these fields complement Shell’s 20 per cent stake in the nearby giant Libra field.
Also operated by Petrobras, Libra is estimated to hold up to 12 billion barrels, making it the largest discovery in Brazil’s history.
Megaprojects
Like Petrobras, Shell is a recognised leader in deep-water offshore megaprojects such as those under way in the Santos basin which local analysts have said require oil at around $50 a barrel just to break even.
Its purchase of BG's stake in the fields still needs approval from Brazilian regulators but an expanding role for a super-major with deep pockets in the Santos basin will likely be welcomed by the government in Brasília as it seeks to shore up collapsing confidence in the country's scandal-hit energy sector.
