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Fresh doubts over Shell and BG merger as Qatar sells £1bn stake

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The Qatar Investment Authority has sold 43m shares in BG Group and a further 24m shares in Shell

By Ben Marlow 7:45PM GMT 14 Nov 2015

The Qatar Investment Authority has offloaded shares in Shell and BG worth nearly £1bn in recent weeks, raising fresh questions over whether the oil­giants’ proposed mega-merger has the support of major shareholders.

The sovereign wealth fund, led by Sheikh Abdullah bin Mohammed AlThani, a member of the Qatari royal family, has sold around 43m shares in BG Group, worth roughly £550m, and a further 24m shares in Shell, with a value of approximately £421m.

The sell-off, over a period of less than three weeks between the end of October and the first week of November, will be a blow to Shell’s chief executive, Ben van Beurden.

The Dutchman has had to fend off persistent questions about the logic of pressing ahead with Shell’s mammoth £43bn takeover of BG Group despite the dramatic slump in the price of oil.

The QIA is one of Shell’s biggest investors, with a 4.88pc stake, and also holds a 1.76pc stake in BG. Qatar is also one of the world’s biggest producers of liquid natural gas, meaning its support for the bumper tie-up will be of huge importance to both sides.

Analysts at Olivetree Financial said: “The market is concerned that these sales have been discriminatory towards BG, and therefore suggesting some underlying reason which might be worrying for the fate of the transaction.”

Sources close to the deal sought to play down the significance of Qatar’s share sell-off, arguing that it has been driven by the Gulf state’s attempts to free up cash in the face of big losses on positions in other large European companies.

The QIA has taken big hits on its stakes in the troubled German carmaker Volkswagen, where it is one of the largest shareholders, and in Glencore, the mining giant.

The value of those two holdings has plummeted by billions of dollars in recent months as Qatar’s infrastructure bill for hosting the football World Cup in 2022 piles up.

However, while sources close to the QIA declined to comment on the Shell and BG share sales, they played down suggestions that one of the world’s largest sovereign wealth funds needed to raise cash. Although it’s recent paper losses have been large, they are relatively minor when compared to the size of the QIA’s fund, estimated to be around $250bn.

Royal Dutch Shell has seen its share price slump by 25pc since April, when the oil major unveiled its bid for BG. Shares in BG Group have fallen 17pc over the same period.

Mr Van Beurden originally said for the deal to work, the oil price needed to be $67 a barrel in 2016, $75 in 2017 and $90 by 2018. Brent crude is currently hovering around $43 a barrel.

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