Yesterday saw the birth of a new player in the global energy industry. In the middle of some of the toughest market conditions seen in decades, the joining together of Shell and BG creates a company of extraordinary strengths, a combination greater than the sum of our parts. I feel privileged to be part of this historic, transformative moment.

It has been an intense ten months since we first announced the combination with BG and yesterday was a very special milestone for us, officially the first day of operations for the combined company. It also has been a period of great volatility. Although the oil price has fallen since our announcement, I remain convinced of the strategic and financial merits of the deal.

Over time, I expect the fundamentals of energy supply and demand to reassert themselves and the strategic and economic benefits of the deal to fully deliver for shareholders. The deal reinvigorates Shell and will be a springboard for further transformation. We now plan to shape a simpler, leaner, more agile and competitive company focusing on our priorities for growth in liquefied natural gas and deep water.

The acquisition significantly boosts our oil and gas reserves and production capacity and is expected to provide a strong injection to our operating cashflow. It underpins our role as one of the world’s largest independent producers of LNG.

This deal is not about size, though. It is about quality. The combined value of our existing and potential energy projects creates a company more able to brave the cycles in our industry and strengthens our ability to pay the dividend at any oil price that might reasonably be expected.

In the UK, Shell inherits several projects in the North Sea. These are a good fit with our existing operations in what is still an important region for energy production, despite the challenges it faces.

Shell has acquired big oil and gas projects in Brazil and Australia and interests in other key countries. The deep-water interests in Brazil we now own were one of the key drivers of this deal. Brazil is a country we know well, through the exploration and production aspects of our business, our retail outlets and our low-carbon biofuel joint venture. It is a country of the highest strategic importance to us, with plenty of potential for growth.

Our global deep-water experience and technical expertise will help us to build on our existing relationship with Petrobras, the national oil company. The Libra joint venture already plans to develop a major oilfield more than 100 miles off the coast of Brazil. Our newly acquired deep-water operations off Brazil will add to current production from our Parque das Conchas oil and gas project.

Ben van Burden, Shell CEO
Ben van Beurden, Shell Chief Executive Officer

We see potential for immediate benefits from our and BG’s complementary LNG operations in Australia and Trinidad and Tobago, as well as in Asia, a crucial and growing market. Other clear benefits include BG’s strong position in trading and shipping, which will bolster Shell’s capabilities, volumes and relationships in these core areas for the future development of the global gas market.

We are determined to use this coming together to achieve efficiencies. At $33 billion, our planned capital investment in 2016 is considerably 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. We have already announced plans to reduce staff and contractors, which in these harsh economic times is a difficult but necessary step.

This timely rejuvenation of Shell sharpens our ability to adapt and thrive in an energy landscape that will continue to change. A global energy transition is under way. I want Shell to be part of this transition by producing more natural gas to replace coal in power generation; continuing to invest in the development of energy sources for the future, such as low-carbon biofuels and hydrogen as a fuel for transport; and by helping to develop carbon capture and storage. We will continue to advocate government-led carbon-pricing systems.

This is one of the largest acquisitions in UK corporate history and the biggest in the energy industry for many years. However, we mustn’t forget that people make companies and we will make sure that our combined teams blend together smoothly. There is much to learn from one another. 

Those who have worked hard to build BG’s impressive portfolio will find they are among like-minded, bright, inventive, resilient people who care about the industry they work in and about the health of our planet.

To create a more structured and transparent process for integration of the companies, we have set up a transition organisation. Each existing part of Shell’s business will be swift to understand the activities and support needed for our new assets and businesses. Now we must set about delivering the value we’ve promised. Ahead lie several months of detailed collaboration between colleagues from both Shell and BG to achieve full integration towards the end of the year.

In my 32 years with Shell, I have sometimes heard people say: “This company is like an ocean-going tanker. It takes an age to turn.” With the completion of this deal, we have truly changed course and are going full speed ahead.

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