Shell's Focus Shifts To LNG

Royal Dutch Shell said its $70 billion acquisition of the BG Group would allow it to realize $3.5 billion in savings, shed $30 billion in uncompetitive assets, and expand its operations in the fast-growing liquefied natural gas (LNG) industry.

Although the British-based BG is only a midsize oil company, it is a major player in LNG, which is becoming an increasingly popular alternative to other fossil fuels. The deal gives Shell a world-leading position in producing and trading LNG.

The company has been criticized for making a big acquisition at a time of low oil prices, but it is portraying the BG deal as an opportunity to streamline its own portfolio. Shell said it now expected to gain $3.5 billion in cost savings through job cuts, procurement savings, and other operational efficiency.

Shell, which hopes to complete the BG deal by early next year, said it would place its liquefied natural gas and related businesses into a separate unit called Integrated Gas.

The energy giant has invested heavily in LNG in recent years — to the tune of about a third of its overall $200 billion in invested capital, including in a process called gas-to-liquids that converts natural gas into fuels like diesel and jet fuel.

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