Shell Finalizes BG Group Deal at Bad Time in LNG Market

April 2016, Vol. 243, No. 4

Shell completed its acquisition on Feb. 15 of BG Group, a British company formed in 1997 from the privatization and breakup of state-owned British Gas. The Group has sites in over 20 countries and draws 75% of its LNG customers from Asia. BG delivered 17.9 million metric tons of LNG in 2015, up 63% from the previous year. Shell is experienced in developing gas fields and distributing the product. Adding BG will boost its reselling and other trading operations. Shell now has capacity to liquefy 33 million tons annually, compared to No. 2 player ExxonMobil’s 22 million tons.

The slump in prices is an unexpected hurdle for Shell which has said it will make $33 billion in capital investments in 2016, a 30% drop from Shell and BG’s combined 2014 figure. The prospect of U.S. LNG exports, hotly anticipated by Asian buyers, also puts the market at a historic turning point.

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