[WORLD] Shell has been in discussions with advisers about the possibility of acquiring rival oil giant BP. The energy major has been evaluating the strategic benefits and viability of a takeover in recent weeks, the report claims, citing individuals familiar with the talks. Should such a deal materialize, it would rank among the largest transactions in the history of the oil and gas industry.
BP has faced mounting challenges in recent months, both internally and as part of broader pressures on the fossil fuel sector. Volatile oil prices, investor concerns over the pace of the energy transition, and criticism over its sluggish progress toward climate targets have all weighed heavily on the company. Confidence in BP has eroded, with shares falling more than 30% over the past year.
The company’s turnaround efforts under chief executive Murray Auchincloss have yet to resonate with investors, particularly as oil prices have dipped and BP’s green strategy appears to be faltering.
In contrast, Shell has maintained a comparatively solid footing, supported by a diverse asset portfolio and strategic investments in renewables. This resilience has strengthened its financial position and could provide leverage in pursuing a deal.
Shell might also be biding its time to see if BP initiates talks with another potential bidder. Deliberations remain preliminary, and Shell may ultimately opt to prioritize share buybacks or smaller-scale acquisitions rather than pursuing such a transformative merger.
A combined Shell-BP entity would dramatically alter the landscape of the global energy sector and carry significant implications for the UK economy, where both companies play major roles as employers and contributors to GDP. Any such deal would likely attract regulatory and public scrutiny amid growing concerns about the environmental impact of fossil fuel producers.
Shell, with a market valuation of £145.6bn, is more than twice the size of BP, which is valued at £55.9bn. Responding to inquiries, a Shell spokesperson reiterated: “As we have said many times before, we are sharply focused on capturing the value in Shell through continuing to focus on performance, discipline and simplification.” BP declined to comment on the matter.
In February, Auchincloss outlined plans to “fundamentally reset” BP’s strategy, signaling a potential rollback of previous climate pledges and renewed investments in traditional oil and gas projects in a bid to revive shareholder returns.
BP’s profits plunged nearly 50% in the first quarter of this year, falling to $1.4bn (£1bn) from $2.7bn in the same period last year. The company’s underperforming stock has also attracted interest from activist investor Elliott Management, based in New York.
BP has struggled to keep pace with competitors since former CEO Bernard Looney pivoted the firm toward a net-zero future. Looney stepped down abruptly in September 2023 after admitting he failed to fully disclose past relationships with colleagues.
On Friday, Shell reported adjusted earnings of $5.6bn for the first quarter—a 28% year-on-year drop, yet still ahead of analyst expectations.
Shell CEO Wael Sawan told the Financial Times that the company remains focused on returning capital to shareholders. “We will always look at these things, but you are also looking to see what is the alternative,” he said. “Right now, buying back Shell for us continues to be absolutely the right alternative to go for.”
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