Royal Dutch Shell’s oil giant is reviewing its holdings in the largest US oil field for possible sales. Instead, the company wants to focus on its most profitable oil and gas assets and increasing low-carbon investments.
The sale may be part or all of Shell’s approximately 260,000 acres (105,200 hectares) of land in the Permian Basin (mainly in Texas). The talks were conducted in private. However, there are rumors that the value of the shares might be as high as 10 billion US dollars.
All the oil companies are under pressure from investors to reduce investment in fossil fuels.
Shell is one of the largest oil companies in the world. Investors require reducing fossil fuel investments to prevent global climate change caused by carbon emissions. As a result, Shell, BP Plc, and TotalEnergies have pledged to reduce emissions by increasing investment in renewable energy while divesting some oil and gas shares.
According to Upstream director Wael Sawan, Shell produces approximately 160,000 to 170,000 barrels of oil per day in the Permian Basin. However, Sawan has stated that the company has reduced its Permian production by about 20,000 barrels per day. His goal was to save cash in the past year.
In recent years, shareholders and activists have strongly urged oil companies such as Shell, Exxon Mobil, and Chevron to reduce carbon emissions. This year, their voices are getting louder and more successful.
US oil futures rose 49% this year to nearly US$72 per barrel.
Why Did Oil Futures Grow This Year?
M&A activities in the largest shale oil field in the United States surged last year, as some companies tried to increase their holdings. Others wanted to take advantage of rising prices to sell. It helped oil futures to grow.
Shell outlined a plan earlier this year that included targets to reduce the carbon intensity of the energy products. As a result, Shell plans to drop its sales by at least 6% before 2023 and by at least 20% before 2030 compared to 2016 levels.
Last month, the International Energy Agency (IEA) stated that consumers should immediately stop investing in new fossil fuel projects. It is a new United Nations-supported goal to limit global warming.
The world would need a lot of new oil and gas investment in the next few years. They need to meet the demand for automotive fuels and chemicals.