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Shell share price: boss to present BG merger case to China regulators

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Article by Veselin Valchev published 
Wednesday, 06 May 2015 by

Shell share price: boss to present BG merger case to China regulators

Ben van Beurden on tour to win authorities’ approval for £47bn deal

Royal Dutch Shell Plc’s (LON:RDSA) chief executive Ben van Beurden is scheduled to visit China this week, in what analysts say is a crucial moment in the company’s drive to earn regulatory approval for the proposed £47 billion merger with smaller London-listed rival BG Group Plc (LON:BG).

Shell‘s share price had dipped 0.02 percent to 2,091.00p as of 14:08 BST today, falling short of the blue chip London benchmark FTSE 100 index, which had gained about 0.4 percent. Shell’s stock has lost nearly three percent in the year-to-date, and is down more than 10 percent on an annual basis.

Shell’s proposed acquisition of fellow oil and gas explorer BG Group is set to create the world’s leading liquefied natural gas (LNG) business in the world, which by Shell and BG’s projections will account for more than 15 percent of the global LNG trade by 2018.

This dominant position should worry China, which plans to double its natural gas consumption by 2020, Bloomberg analysts argued. The issue appears even more sensitive given the two companies’ positions and projects in Australia.

“The thing that could potentially tumble out of the closet is BG and Shell’s LNG projects in Australia, which export to China,” Gordon Kwan, Hong Kong-based head of regional oil and gas research at Nomura International said as quoted by Bloomberg. “They might have to divest some stake.”

Van Beurden himself took a much more optimistic stance, saying that China, Brazil, Australia and Kazakhstan, whose approvals Shell needs, have been “positive and logical” so far.

Analysts note, however, that China, the world’s biggest energy importer, has a history of challenging high-profile deals, and will pose the biggest threat to the merger.

“Sovereign governments are nervous about potential market powers,” Jonathan Stern, head of the natural gas programme at the Oxford Institute for Energy Studies, said, as quoted by Bloomberg. “The Chinese may well demand that Shell limit the volumes of LNG that is supplied from their portfolio to China.”

Meanwhile, Shell reported better-than-expected first quarter results last week. Earnings on a current cost supplies basis excluding identified items – a measure preferred by analysts –dropped 56 percent to $3.2 billion, but still surpassed projections of about $2.5 billion.

As of 15:02 BST, Wednesday, 06 May, Royal Dutch Shell Plc ‘A’ share price is 2,085.50p.

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