Shell and BG to swap key North Sea gas assets

The Business: Shell and BG to swap key North Sea gas assets

“The news shows that last month’s deal to exchange a 25% stake in Shell’s $20bn (£11bn, E16.4bn) Sakhalin Liquefied Natural Gas project for 50% in a vast Western Siberian field is just the first in a stream of swap agreements being negotiated by the firm as it desperately manoeuvres to make up for a shortage of oil reserves compared with its peers.”

Posted Monday 22 August 2005

By: Richard Orange

OIL giant Royal Dutch Shell is in advanced talks with gas major BG Group to swap key gas assets in the North Sea, The Business has learned.

The news shows that last month’s deal to exchange a 25% stake in Shell’s $20bn (£11bn, E16.4bn) Sakhalin Liquefied Natural Gas project for 50% in a vast Western Siberian field is just the first in a stream of swap agreements being negotiated by the firm as it desperately manoeuvres to make up for a shortage of oil reserves compared with its peers.

An oil industry source said: “We know that Shell are out there looking to swap some of their equity gas. They’ve definitely been talking to BG Group and, we think, possibly Total as well. It’s going to be fairly high profile fields.” Shell chief executive Jeroen van der Veer highlighted the importance of swaps in Shell’s strategy at the company’s most recent results.

He said: “You can go for divestments, for acquisitions, for swaps. You will see us very active in these fields.”

BG and Shell hold significant positions in the southern North Sea, leaving a chance for them to rationalise their holdings. BG Group is also looking to increase its gas position in Norway, meaning it may be interested in part of Shell’s share in the huge Ormen Lange field. In exchange, BG could hand Shell some of its 22% stake in the Buzzard field, the largest UK discovery in a decade. As for Total, Shell has long coveted the company’s Alwyn gasfield.

Analyst Jonathan Rigby, of UBS Warburg, said that the high oil price, which has left oil companies awash with cash, made swaps a much more attractive method than sales for improving oil companies portfolios.

He said: “It’s something that’s of particular relevance to Shell. What they’re trying to do is get their portfolio right. The last thing they need is more cash.”

Shell has already carried out some North Sea swaps. In February it signed a deal with Norwegian oil firm Statoil to swap offshore assets in Norway, increasing Shell’s share of the European gas supply market and rationalising its portfolio in the country.

Shell acquired a 6.45% shareholding in the Kvitebjoern field and gave Statoil minority interests in four production licenses. Shell and Statoil also agreed that Shell would take 10% stakes in three Statoil-operated deepwater licenses.

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