Oil major insists its assets will not be stranded by greenhouse gas emissions curbs, against protests £40bn deal is overvalued
By Megan Darby
Shell is going ahead with a £40 billion (US$57bn) takeover of BG Group, after shareholders voted 83% in favour on Wednesday.
The oil major rebuffed concerns the deal was overvalued amid low oil prices and global climate goals that clash with the sector’s long term viability.
Chief financial officer Simon Henry insisted: “Shell does not suffer from a stranded asset problem.”
Standard Life, an investment firm, led opposition to the merger, saying it only made sense at an oil price of US$60 a barrel, double the current level.
#Shell CFO annoyed with @CarbonBubble $2.7trillion. Citing “we don’t do coal” and “Shell does not suffer from a #strandedasset problem”
— Cindy Coltman (@ColtmanCindy) January 27, 2016
Norway’s sovereign wealth fund backed Shell, however, arguing companies should stick together through tough times. Based on the country’s oil revenues, it is divesting from coal on climate grounds but continuing to fund hydrocarbon businesses.
Governments last month in Paris agreed to hold global warming “well below 2C”, implying a rapid phase-out of fossil fuel burning.
Analysts at Carbon Tracker Initiative estimate $77 billion of Shell’s planned investment in oil and gas projects is surplus to the 2C threshold.
Under shareholder pressure, Shell last year agreed to produce its own analysis of its assets’ viability in a 2C world, which has yet to be published.
The company subsequently axed its Arctic drilling programme, an expensive frontier venture campaigners argued would never pay off in a carbon-constrained future.
Will Shell publish risk analysis about stranded assets, asks @frie_ha. Shell say they’ll look into it #ShellEGM
— Juliet Phillips (@_JulietPhillips) January 27, 2016