Skip to main content
A scary good deal on trusted journalism
Get full digital access to globeandmail.com
$0.99
per week for 24 weeks SAVE OVER $140
OFFER ENDS OCTOBER 31
A scary good deal on trusted journalism
$0.99
per week
for 24 weeks
SAVE OVER $140
OFFER ENDS OCTOBER 31
// //

Royal Dutch Shell is reviewing its holdings in the largest U.S. oil field for a potential sale, people familiar with the matter told Reuters, marking a key moment in its shift away from fossil fuels as it faces growing pressure to slash carbon emissions.

The sale could be for part or all of Shell’s position in the U.S. Permian Basin, located mostly in Texas, which accounted for around 6% of the Anglo-Dutch company’s total oil and gas output last year. The holdings could be worth more than US$10-billion, the people said.

Shell declined to comment.

Story continues below advertisement

There was no guarantee Shell would end up striking a deal for the assets, said the people, who spoke on condition of anonymity to discuss confidential information.

Shell, the second largest western energy company, and its peers have come under investor pressure to increase profits and slash planet-warming greenhouse gas emissions, including by shedding assets.

Any retreat from the Permian would mark a major shift from an area previously identified as one of nine core basins in its energy transition strategy to net-zero carbon emissions by 2050. For all the activity in the Permian, profits have remained elusive because of scale and constant drilling required to boost output.

Shell’s energy transition plan, one of the sector’s most ambitious, aims to reduce oil and gas output gradually and boost spending on renewables, hydrogen and low-carbon technologies.

A Dutch court last month ordered Shell to reduce its greenhouse gas emissions by 2030, much faster than planned. Shell plans to appeal the ruling, CEO Ben van Beurden said last week, but the company will also deepen emission cuts, a move likely to shrink its oil and gas business.

The energy major plans to reduce oil output by 1% to 2% per year by 2030 through lower investment and disposals. It will increase spending on renewables and low carbon technologies to up to 25% of its overall budget by 2025.

PERMIAN HEATING UP

The Permian’s rapid growth upended global oil markets last decade with vast production and the ability to ramp output up and down. Its potential for future gains has fuelled strong deal making even amid uncertainty over the long-term outlook for oil demand.

Story continues below advertisement

Benchmark oil prices have soared this year with fuel demand rising as the coronavirus pandemic ebbs. U.S. crude futures are up 49% this year to nearly US$72 per barrel, more than double their 2020 lows.

More shale deals are likely this year, with industry experts pointing to big Permian land holders including Chevron and Exxon Mobil aiming to shed some assets to raise cash.

Permian consolidation has accelerated, with Pioneer Natural Resources acquiring two companies, and ConocoPhillips acquiring another. Occidental Petroleum agreed to sell some of its Permian holdings to Colgate Energy for US$508-million in a move to reduce its debt.

A U.S. DOWNSIZING

Shell’s oil and gas production from company-operated and non-operated rigs in the Permian averaged 193,000 barrels of oil and gas per day in 2020, according to its website, down from about 250,000 the prior year.

Permian production overall is roughly 4.5 million barrels per day, or about 40% of total U.S. output.

A Permian sale would further shrink Shell’s U.S. footprint. The company has agreed to sell all but one of its U.S. oil refineries. It continues major offshore production in the Gulf of Mexico and could green-light a new development, called Whale, in the coming months.

Story continues below advertisement

A full sale would mark one of Shell’s largest disposals in recent years and pare net debt to below its US$65-billion target, a key part of its energy transition strategy. Net debt reached US$71-billion at the end of March.

The Hague-based Shell bought its initial Permian acreage from Chesapeake Energy in 2012 for US$1.9-billion and inherited a joint venture that Chesapeake had with Anadarko. They dissolved the venture five years later, leaving Shell with the 260,000 net acres it now holds.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.

Your Globe

Build your personal news feed

  1. Follow topics and authors relevant to your reading interests.
  2. Check your Following feed daily, and never miss an article. Access your Following feed from your account menu at the top right corner of every page.

Follow topics related to this article:

View more suggestions in Following Read more about following topics and authors
Report an error
Tickers mentioned in this story
Due to technical reasons, we have temporarily removed commenting from our articles. We hope to have this fixed soon. Thank you for your patience. If you are looking to give feedback on our new site, please send it along to feedback@globeandmail.com. If you want to write a letter to the editor, please forward to letters@globeandmail.com.

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff. Non-subscribers can read and sort comments but will not be able to engage with them in any way. Click here to subscribe.

If you would like to write a letter to the editor, please forward it to letters@globeandmail.com. Readers can also interact with The Globe on Facebook and Twitter .

Welcome to The Globe and Mail’s comment community. This is a space where subscribers can engage with each other and Globe staff.

We aim to create a safe and valuable space for discussion and debate. That means:

  • Treat others as you wish to be treated
  • Criticize ideas, not people
  • Stay on topic
  • Avoid the use of toxic and offensive language
  • Flag bad behaviour

If you do not see your comment posted immediately, it is being reviewed by the moderation team and may appear shortly, generally within an hour.

We aim to have all comments reviewed in a timely manner.

Comments that violate our community guidelines will not be posted.

UPDATED: Read our community guidelines here

Discussion loading ...

To view this site properly, enable cookies in your browser. Read our privacy policy to learn more.
How to enable cookies