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Shell Said to Mull Sales From U.S. to India in $30 Billion Plan

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By Dinesh NairMatthew Campbell and Rakteem Katakey: 2 March 2016

Royal Dutch Shell Plc is lining up assets for a $30 billion divestment program that may extend from the U.S. and Trinidad to India following its record takeover of BG Group Plc, according to people with knowledge of the matter.

Assets linked to Shell’s interests in Trinidad & Tobago and stakes in oil and gas fields in India may be on the block, two of the people said, asking not to be identified because the plans are confidential. Pipelines in the U.S. are also high on the list, they said, adding that disposal plans aren’t final and will depend on demand.

Raising money through divestments is crucial for Shell after the BG purchase wiped out more than $10 billion of its cash, prompting a credit-rating cut from Fitch Ratings Ltd. as debt-to-equity levels rose. Oil’s collapse over the past 20 months has eroded balance sheets across the industry and the outlook for a sustained market rout may hinder Shell’s efforts to find buyers for the assets.

Jonathan French, a spokesman for Shell, declined to comment.

Atlantic LNG

The Anglo-Dutch company entered Trinidad’s Atlantic liquefied natural gas project in 2014 with the purchase of stakes from Repsol SA. The BG deal raises its interests in the facility’s four units and gives it control over gas fields in the country, as well as the pipelines that transport the fuel to the plant.

In India, Shell has gained operatorship of the Tapti and Panna-Mukta fields off the country’s west coast. It also got BG’s 49.75 percent stake in Mahanagar Gas Ltd., which supplies the fuel to homes and vehicles in Mumbai. In Myanmar, it has interests in four exploration blocks in the offshore Rakhine Basin.

In the U.S., Shell’s interests in a network of pipelines that carry both crude and oil products will be a focus for divestments, the people said. Some of the stakes are held through Shell Midstream Partners LLP, which started trading in 2014 in New York. The business is likely to account for as much as 15 percent of the $30 billion sale target over three years, Shell Chief Executive Officer Ben Van Beurden said on a Feb. 4 conference call.

Market Rout

The price of Brent crude, the international benchmark, has tumbled almost 70 percent since mid-2014. That’s wiped out profits across the industry and sapped cash for acquisitions. The Hague-based Shell is the only major oil producer to have used the downturn to make a large purchase, the biggest in its history. The company says the BG deal will add to cash flow at any oil price and increase its production and reserves.

Europe’s largest oil company by market value sold $20 billion of assets in 2014 and 2015 combined, Van Beurden said last month. Of the $30 billion in disposals targeted for 2016-18, less than $10 billion will come in this year while the market remains weak, he said.

Sales are more likely to be “backend-loaded than frontend-loaded” over the three years, Van Beurden said. The first $10 billion to $15 billion will focus on “downstream and midstream,” according to the CEO. That includes oil terminals, refineries and pipelines.

There’s interest in assets particularly in the downstream industry and “some local gas markets,” as well as among private-equity investors, he said. “The buyers are there.”

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