Shell's North Sea Asset Sale Could Signal Move Towards 'Protectionism' Era

Shell's North Sea Asset Sale Could Signal Move Towards 'Protectionism' Era
Royal Dutch Shell plc's decision to sell a package of North Sea oil and gas fields to private equity-backed Chrysaor for $3.8 billion could signal a move towards an era of 'protectionism'.

Royal Dutch Shell plc’s decision to sell a package of North Sea oil and gas fields to private equity-backed Chrysaor for $3.8 billion could signal a move towards an era of ‘protectionism’, according to Christian Stadler, a professor of strategic management at Warwick Business School.

"This could be part of a larger play here as we move towards an era of protectionism,” Stadler said.

“Global companies will be looking more cautiously at which countries to invest in as national borders become more real again and internationalism becomes more difficult, forcing more scaling down,” he added.

The professor highlighted that Shell is better positioned than most in this regard, as the company has a “heavily decentralized structure” so can take things on a country by country basis.

Commenting on the nature of Shell’s announced sale, Stadler suggested that this was likely to be just another in a long line of deals for the company.

"This is part of a long-term sell-off. They’re $12.5 billion through a plan to sell assets totaling $30 billion, which arises partly from their BG acquisition and partly from a need to shift and focus on things they are best placed to do,” Stadler said.

"It is a common approach for such large companies to look at concentrating on their bigger resources and selling off their smaller ones,” he added.

Following Shell’s announcement that it would sell some of its North Sea assets, industry body Oil & Gas UK welcomed the company’s decision.

“This is a very significant deal and signals a strong vote of confidence in the future of the UK Continental Shelf and the focus on maximising economic recovery,” Oil & Gas UK Chief Executive Deirdre Michie said in a statement sent to Rigzone.

“With these acquisitions, Chrysaor becomes a leading independent oil and gas company in the UK and one of its largest producers on an equity basis. Maintaining a diversity of operators in the region is crucial and we welcome Shell’s continued significant presence here as well as the arrival of new companies like Chrysaor,” she added.

Michie also said that Oil & Gas UK welcomed Chrysaor’s intent to explore and invest in its new portfolio, as it sends positive signals about the opportunities the UK’s offshore oil and gas basin has to offer. 

“This region still has the potential to yield many more millions of barrels of hydrocarbons, helping to meet the country’s primary energy needs, secure jobs and generate wealth for the economy,” Michie said.

“Following on from similar deals in recent months, the new activity that this transaction could generate will be good news for the sector’s supply chain across the UK, which has been severely impacted by the downturn,” she added.

Shell’s deal, which accounts for more than half of the company’s production in the North Sea, includes an initial consideration of $3 billion and a payment of up to $600 million between 2018-2021 subject to commodity prices, with potential further payments of up to $180 million for future discoveries.

The deal is subject to partner and regulatory approvals, with completion expected in the second half of 2017.


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