KEY POINTS
- Shell will acquire a 30% stake in BP-operated Conifer in the Gulf of Mexico.
- Shell will also take 50% of BP’s Tupinamba block in Brazil.
- The deals reinforce Shell and BP’s renewed focus on oil and gas growth.
Shell Offshore, a subsidiary of global energy major Shell, is set to acquire a 30 per cent stake in the Conifer exploration prospect in the Gulf of Mexico from BP.
The transaction strengthens the companies’ cooperation in upstream oil and gas as both Shell and BP increasingly focus on expanding their traditional energy portfolios following years of investment in renewable and lower-carbon businesses.
BP will retain a 70 per cent interest in the Conifer prospect and will continue to operate the project.
The companies did not disclose the financial terms of the transaction in the announcement. The deal extends beyond the Gulf of Mexico, with Shell also agreeing to acquire a 50 per cent interest in the Tupinamba exploration block in Brazil’s Santos Basin.
BP will retain the remaining 50 per cent interest in Tupinamba and will continue as operator of the Brazilian exploration block.
The transactions give Shell additional exposure to two important offshore oil and gas regions while allowing BP to maintain operatorship and significant ownership interests in both projects.The Gulf of Mexico is an important component of the United States’ domestic oil industry, accounting for about 15 per cent of US crude oil production.
The region has remained a major focus for international oil companies because of its established offshore infrastructure, existing discoveries and potential for additional exploration and development.
For Shell, acquiring a stake in the Conifer prospect provides an opportunity to strengthen its position in the US offshore oil sector while sharing project ownership with BP.
Brazil becomes increasingly important to BP
The Brazilian transaction comes as the South American country assumes a growing role in BP’s upstream strategy.
BP has previously highlighted its Bumerangue discovery in Brazil, describing it as its largest oil and gas discovery in 25 years.
The company said earlier this year that the Bumerangue discovery contained about eight billion barrels of liquids, reinforcing Brazil’s importance to its upstream portfolio.
The scale of the discovery has increased the strategic significance of BP’s Brazilian operations and underlines the company’s continued interest in deepwater oil and gas opportunities. The transactions reflect a broader shift in strategy by Shell and BP as the companies place greater emphasis on their oil and gas businesses.
Both companies spent years increasing investments in renewable energy and other lower-carbon businesses, but have more recently placed greater priority on profitable traditional energy operations and long-term upstream growth.
The latest agreements suggest that offshore oil and gas assets remain central to their efforts to maintain production and strengthen their portfolios.
For Shell, the acquisition adds interests in both the Gulf of Mexico and Brazil. For BP, retaining operatorship of the assets allows it to maintain control of exploration and development activities while bringing Shell in as a partner.
The transactions therefore provide both companies with opportunities to expand their upstream positions while sharing the financial and operational responsibilities associated with offshore exploration.
