Oil giant Shell and the UK’s third largest energy company BG Group have reached an agreement on a deal that will produce a company with a value of more than £200bn. It is likely to be one of the year’s largest deals and is of massive significance within the oil and gas sector.
BG Group, which was created in 1997 when British Gas demerged into BG and Centrica, currently employs around 5,200 people across 24 countries.
Centrica then took control of the UK retail business whilst BG had responsibility for exploration and production.
BG then split again in 2000, into BG Group and Lattice Group.
Similarly to other businesses operating within the oil and gas industries, BG Group have been struggling in recent months with a glut of oil seeing prices drop by 50% since last summer.
Although Shell has been affected, announcing 250 job cuts in the North Sea, it is strong enough to withstand the fluctuations and the announcement has triggered BG’s share prices to rise 42% to £13.
Shell’s Chief Executive Officer Ben van Beurden said, “Bold, strategic moves shape our industry. BG and Shell are a great fit. The transaction fits with our strategy and our read on the industry landscape around us. BG has always been on the top of our list.”
The deal is likely to add 25% to the company’s proved oil and gas reserves and an additional 20% to production. It will also strengthen Shell’s position in the Australian LNG market and in Brazil deep water.