Entry By Acquisition

This article was originally published in the Africa Energy Series: Equatorial Guinea book.

Shell entered Equatorial Guinea with its purchase of global gas company BG Group in 2016, taking over an LNG contract and holding out the possibility of further investments.

Shell’s acquisition of BG Group in February 2016 brought the energy giant into Equatorial Guinea for the first time, as BG Group was the long-term buyer of LNG cargo from the EG LNG facility.

Shortly after the acquisition was 
finalized, in July 
2016, Minister of
 Mines and Hydrocarbons Gabriel
 Mbaga Obiang
Lima met with Shell
 officials to solidify the company’s involvement in
Equatorial Guinea.
The two sides signed a Memorandum of Understanding, agreeing that Shell would continue with the 17-year purchase agreement originally held by BG Group. Additionally, the Ministry of Mines and Hydrocarbons and Shell agreed to cooperate on oil and gas-related projects.

“Equatorial Guinea is an African leader in upstream oil and gas development and the strategic monetization of gas reserves” stated the minister after the signing of the MoU. “The government has pledged to continue on this progressive path, and with the knowledge and experience of Shell Group, I am confident that this agreement will usher in new opportunities for investment. We look forward to a long and productive relationship with Shell and anticipate further cooperation on a range of oil and gas initiatives.”

The MoU leaves open the possibility of Shell participating in new hydrocarbons projects. Shell also expressed interest in being named the offtaker from the Fortuna FLNG facility when it comes online in 2020. The company was named as a potential offtaker, along with Gunvor Group and Vitol in 2017. Gunvor Group, however, was ultimately named the offtaker for the project.

The $53 billion acquisition of BG Group made Shell the second largest oil and gas company in the world, with a diverse portfolio of petroleum upstream, downtream, trading and renewable energy projects. Shell holds the number two spot behind ExxonMobil, which remains the largest oil and gas company by market capitalization.

The acquisition of BG Group also firmed up Shell’s presence in Africa, especially as the continent seeks to monetize vast gas resources from coast to coast, and its position in the LNG sector. Equatorial Guinea, in particular, is on a drive to monetize gas resources. The Punta Europa gas complex, which houses EG LNG, is a provider of LNG to global markets since 2007.