Shell begins review of BG Myanmar assets

Royal Dutch Shell has embarked on a detailed review of BG Group’s assets in Myanmar after the international oil giant completed a US$53 billion acquisition of its British rival on February 15.

The two companies have been in discussions about the sale since 2014, but their Myanmar assets have not yet been combined, officials said.

“This week saw the birth of a new player in the global energy industry in the midst of some of the toughest market conditions seen in decades,” Shell chief executive Ben van Beurden said in a statement.

Both parties have informed Myanmar authorities of their plans informally, and the transfer of assets is still in process, said an official from the Ministry of Energy.

“There will be no objection. We are going to approve their merger. At the moment, it is still being processed, and no change has been seen in their assets.”

In 2013 bidding rounds, Royal Dutch Shell won three deepwater blocks, and BG Group won four, in collaboration with Australia’s Woodside Energy. Production sharing contracts were signed last year and together the two giants committed to invest more than $2 billion in Myanmar over the next six to eight years.

Shell will begin a detailed review of BG Group’s portfolio of assets following the finalisation of the merger on February 15, an official from Shell Myanmar said.

“We will not be in a position to discuss our plans until this process is finalised in the coming months. Shell looks forward to working with key stakeholders in Myanmar to ensure as seamless a transition as possible,” said Yasuko Yoshida, Shell’s country representative in Myanmar. Shell launched 3D seismic campaigns in around 10,000 square kilometres of its Myanmar deepwater blocks last month.

BG Group operates blocks A-4 and AD-2, where it owns 45 percent and 55pc respectively, and began seismic campaigns in both blocks last November, according to the Ministry of Energy. The company also holds a 45pc stake in blocks A-7 and AD-5, which are operated by Woodside Energy. All four blocks are located in the Rakhine Basin.

Following its acquisition of BG Group, Shell plans to spend $33 billion in capital investment over the coming year – less than the combined annual spending of both companies in recent years.

“Over the next three years we plan to sell assets, as well as make significant savings in overlapping costs and reduced spending on exploration,” said Mr van Beurden.

The company has already announced plans to cut staff and contractors as a result of falling international oil prices. The price per barrel of Brent crude has dropped almost 70pc since mid-2014 to $34.98 yesterday, according to Bloomberg data. The combined value of Shell and BG’s existing and potential energy projects will create a company more able to brave the cycles in the oil industry, said Mr van Beurden.

Shell has three areas of business in Myanmar – investing in offshore exploration, developing an LNG terminal and distributing petroleum products.

The company signed an agreement with Italian-Thai Development (ITD) and LNG Plus International (LNGP) last August to develop an LNG receiving and re-gasification terminal in Dawei special economic zone in southern Myanmar.

The LNG terminal is a part of a $1.7 billion deal to develop the first phase of the much-delayed Dawei project according to a Reuters report published last August.

 

Source: Myanmar Times

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