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BG in spotlight as Shell circles 356.9p

By Geoff Foster
20th August 2010

Spotlight: Oil giant BG Group has always been rumoured to be at the top of Royal Dutch Shell’s shopping list

It would certainly make dealers’ eyes water and be one of the biggest ever deals in UK corporate history: a £54billion, or £16 a share, cash bid by Royal Dutch Shell (49p down at 1740p) for BG Group, the oil and gas exploration division that used to be part of British Gas.

That was the rumour doing the rounds yesterday following an interesting interview down under.

Ann Pickard, Shell Australia’s executive vice president, revealed that Europe’s largest oil company plans to spend up to £32billion in Australia over the next ten years as it concentrates more on gas production.

Royal Dutch Shell has a war chest of up to £60billion for acquisitions and BG Group has always been rumoured to be at the top of its shopping list. Pickard’s comments immediately prompted speculative buying of BG’s shares, which touched 1059p before the general dull trend left them 6p easier at 1030p.

Shell apparently plans more than a dozen liquefied natural gas (LNG) projects in Australia, and by 2012 it forecasts that more than 50 per cent of its production will come from gas. Shell agreed in March to acquire Arrow Energy for £1.9billion, giving it reserves to feed an LNG venture in Queensland state.

But if Shell really wants to substantially up its game in Australia, then an offer for BG Group is considered to be a no-brainer. BG entered Australia in early February 2008 via an alliance with Queensland Gas Company to develop coal seam gas fields and construct and own an LNG plant. Its total reserves and resources are now 2.9billion barrels of oil equivalent.

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