The proposed Royal Dutch Shell takeover of BG Group would result in a faster pace of asset sales and reduced investment, and Shell’s chief executive was cool on the company’s future in Egypt as the focus turns to more promising projects elsewhere.
In presentations to investors and the press to explain the rationale for the proposed US$70 billion takeover, the Shell chief executive Ben van Beurden said the focus of the combined company would be on integrated natural gas, particularly liquefied natural gas developments, and on deepwater oil projects.
The share and cash offer from Shell has been recommended by the BG board and values the company at just under $70bn, which was a 52 per cent premium to BG’s recent average share price.
Mr van Beurden emphasised the promising outlook for projects that the two companies are developing offshore Brazil, in North America – including in the Chukchi Sea north of Alaska, where a huge Shell oil rig was boarded by Greenpeace this week as it was being towed to its drilling location – as well as LNG projects in Australia.
At the same time, the Shell chief was cool when asked about projects in the Middle East.
Shell and BG both have assets in Egypt where they, in common with other international companies operating in the country, have had major difficulties during the political turmoil of the past few years, with hundreds of millions of dollars of overdue payments still owed by the government.
Shell operates a number of concessions, including the Assil and Karam fields in the Alam El Shawish West concession in the Western Desert, which began producing last November.
BG has holdings of 35.5 per cent and 38 per cent, respectively, in LNG plants at El Beheira Natural Gas Liquefaction Company and Idku Natural Gas Liquefaction Company. The company declared force majeure on the LNG business last year after the government forced diversion of gas to the domestic market rather than for export.
Asked about the future of the combined group in Egypt, Mr van Beurden said: “In valuation of things we haven’t given it a lot of value in our assessment of the combined company going forward.”
He also said he did not expect Iran to open up to investment any time soon, despite the framework deal reached last week that might lead to easing sanctions, assuming a final deal on Iran’s nuclear programme can be reached this summer.
Shell’s takeover deal was engineered by Mr van Beurden and the BG chairman Andrew Gould during discussions started on March 15, only three weeks after BG’s chief executive, the former Statoil chief Helge Lund, joined the company.
Yesterday, Mr van Beurden said that the takeover deal called for a sharp increase in the sale of assets and lower investment in capital expenditure over the next few years, especially in exploration.
Asset sales, which were $15bn by Shell alone in 2014-15, would be targeted at $30bn for the combined company in the 2016-18 period, according to the Shell chief financial officer Simon Henry.
Mr van Beurden said that the takeover would result in a review of the combined company’s portfolio “and we will de-emphasise and maybe even step out of certain areas”.
Shell has a 30 per cent interest in a major Qatar LNG project – Qatargas 4 – as well as an interest in the Pearl gas-to-liquids project. BG had a prospective block in north-east Oman, near the Saudi Arabia border, but relinquished it in 2009.
The combined company would have a market value of about $250bn, compared to $360bn for ExxonMobil, the world’s largest publicly traded oil and gas company.
Analysts said the strategic emphasis would be growing Brazil from 130,000 barrels per day to about 500,000 bpd, representing about a fifth of the company’s oil output.
“The key attractions for Shell are BG’s deepwater assets in Brazil and its LNG portfolio,” Biraj Borkhataria, an analyst at RBC Capital Markets, wrote in a research note. “BG’s LNG portfolio combined with Shell’s would represent [about] 40 million tonnes per annum or roughly 16 per cent of the global LNG market.”
amcauley@thenational.ae
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In numbers: PKK’s money network in Europe
Germany: PKK collectors typically bring in $18 million in cash a year – amount has trebled since 2010
Revolutionary tax: Investigators say about $2 million a year raised from ‘tax collection’ around Marseille
Extortion: Gunman convicted in 2023 of demanding $10,000 from Kurdish businessman in Stockholm
Drug trade: PKK income claimed by Turkish anti-drugs force in 2024 to be as high as $500 million a year
Denmark: PKK one of two terrorist groups along with Iranian separatists ASMLA to raise “two-digit million amounts”
Contributions: Hundreds of euros expected from typical Kurdish families and thousands from business owners
TV channel: Kurdish Roj TV accounts frozen and went bankrupt after Denmark fined it more than $1 million over PKK links in 2013
Real estate tokenisation project
Dubai launched the pilot phase of its real estate tokenisation project last month.
The initiative focuses on converting real estate assets into digital tokens recorded on blockchain technology and helps in streamlining the process of buying, selling and investing, the Dubai Land Department said.
Dubai’s real estate tokenisation market is projected to reach Dh60 billion ($16.33 billion) by 2033, representing 7 per cent of the emirate’s total property transactions, according to the DLD.
Skewed figures
In the village of Mevagissey in southwest England the housing stock has doubled in the last century while the number of residents is half the historic high. The village's Neighbourhood Development Plan states that 26% of homes are holiday retreats. Prices are high, averaging around £300,000, £50,000 more than the Cornish average of £250,000. The local average wage is £15,458.
2025 Fifa Club World Cup groups
Group A: Palmeiras, Porto, Al Ahly, Inter Miami.
Group B: Paris Saint-Germain, Atletico Madrid, Botafogo, Seattle.
Group C: Bayern Munich, Auckland City, Boca Juniors, Benfica.
Group D: Flamengo, ES Tunis, Chelsea, (Leon banned).
Group E: River Plate, Urawa, Monterrey, Inter Milan.
Group F: Fluminense, Borussia Dortmund, Ulsan, Mamelodi Sundowns.
Group G: Manchester City, Wydad, Al Ain, Juventus.
Group H: Real Madrid, Al Hilal, Pachuca, Salzburg.
Key facilities
- Olympic-size swimming pool with a split bulkhead for multi-use configurations, including water polo and 50m/25m training lanes
- Premier League-standard football pitch
- 400m Olympic running track
- NBA-spec basketball court with auditorium
- 600-seat auditorium
- Spaces for historical and cultural exploration
- An elevated football field that doubles as a helipad
- Specialist robotics and science laboratories
- AR and VR-enabled learning centres
- Disruption Lab and Research Centre for developing entrepreneurial skills
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
