Whispers of a BP-Shell super merger

Posted by John Donovan: 31 October 2023

Once upon a time in a land far, far away from the reality of climate change, the noble knights of Big Oil gallantly rebranded their annual jamboree to “Energy Intelligence,” because, as we all know, changing your name changes your impact on the planet. Meanwhile, our heroes of the hour, Fossil Free London, were throwing a bit of a festive blockade party at the Intercontinental. You might’ve heard of Greta Thunberg? Yeah, she was there, got a badge of honor in the form of a public disorder charge. So large was the fiesta that Shell’s head honcho Wael Sawan had to resort to Zoom to address his oil-loving subjects. How… quaint.

As our eco-warriors beat their drums, Chevron was busy playing monopoly with Hess in a cute little $53 billion deal, because if you can’t beat ’em, buy ’em, right? This merrymaking followed Exxon’s adorable $60 billion acquisition of Pioneer. Who said oil was so last century?

The International Energy Agency, those party poopers, might be saying oil’s going to peak this decade, but Big Oil’s got other ideas. But let’s peek behind the curtain, shall we? Chevron and Exxon might be hoarding their fossil fuels like dragons with gold, but even they can’t ignore the writing on the wall. “

Now, with all this American razzle-dazzle, what’s a poor European oil giant to do? “The pressure is now on for BP and Shell to think about how to beef up,” advises Professor Jeff Colgan. And with Shell’s shares strutting around at a record high, the rumour mill’s buzzing with whispers of a BP-Shell super merger. It’d be like a royal wedding without the love story.

Despite Shell’s Sawan playing coy earlier this year about “large inorganic” acquisitions, one does wonder if he’ll keep playing hard to get.

The Europeans have been flirting with green energy, with BP batting its eyelashes at the 2030s for peak oil and Total winking at wind and solar. Equinor even turned on the charm with the world’s largest wind farm, Dogger Bank. Such show-offs.

But alas, with oil demand doing the boomerang post-pandemic, BP and Shell seem to be ghosting their green pledges. At the Energy Intelligence summit, Sawan played the grizzled realist, “The hard reality is that for many companies… [the transition] is very expensive and will put them out of business.” And wouldn’t you know it, there’s unrest in the renewable ranks at Shell. An open letter this summer? A classic “It’s not me, it’s you.”

Despite their green sweet nothings, Big Oil’s still playing footsie with fossil fuels, spending a pittance on clean energy compared to their oil and gas dalliances. And with inflation and interest rates being the ultimate buzzkill, even wind energy’s feeling the pinch.

Investors are at a crossroads, wondering how to nudge these oil behemoths toward greener pastures without forfeiting those fossil-fueled dividends. Some, like the Church of England Pensions Board, have already swiped left on Shell. Adam Matthews, their chief responsible investing officer, is all about that long-term relationship with an “orderly climate transition.”

The oil sector’s been haunted by the ghost of “peak oil” since 1956 when a certain M King Hubbert, a Shell geologist, had a premonition of oil’s decline by 2000. Fast forward, and it’s all about “peak demand,” a concept as clear as mud.

But fear not, for the oil giants are sticking to their roots, drilling away merrily. They leave the green revolution to the new kids on the block, while they, the “molecule companies,” keep their eyes on the oily prize.

As the Big Oil soiree is set to reconvene in London, expect the return of protesters, undoubtedly more determined than ever to gatecrash the festivities.

And on the home front, Britain continues its grand tradition of hawking its assets with the giddy abandon of a game show giveaway. Could BP be the next “come on down”? Perhaps the government will get crafty and nudge BP into Shell’s open arms, creating an oil giant so mighty that it might just eclipse the need for any environmental commitments. After all, why bother with green when you can bask in the glow of black gold?

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