Shell snaps up US rival as BP's woes worsen

Contrasting fortunes in the oil biz, as Shell bags an East Resources bargain while things get ever-uglier for BP.

by
Last Updated: 22 Sep 2011

So it’s official: BP’s ongoing Deepwater Horizon leak in the Gulf of Mexico is the worst oil spill in US history, with clean up costs already estimated at around $1bn. And seeing as the leak hasn’t been permanently halted yet, that already hefty sum could grow a fair bit more.

Meanwhile, arch rival Royal Dutch Shell is having a somewhat better time on the other side of the Atlantic, as it makes strides to expand its American footprint, snapping up US natural gas explorer East Resources for the bargain price of $4.7bn (£3.2bn). Talk about rubbing salt in the wound…

Amsterdam-headquartered Shell is in fine fettle at the moment. Last month it reported an almost-50% rise in profits in the first quarter of this year, as seven years of declining production were halted. New sites in Russia and off the coast of Brazil added 120,000 barrels of oil to Shell’s daily production.  The purchase of East Resources should help boost its gas presence: the firm has more than 650,000 acres in the Marcellus shale, a rock formation running from West Virginia to New York said to contain reserves of natural gas.

Meanwhile, things continue to go from bad to worse for BP. The company line is that it is ‘too early to say’ whether or not its risky ‘top kill’ procedure has been a success. Apparently the oil company is extending the operation – which forces ‘drilling mud’ and cement into the leaking well in hopes of sealing it - for another one or two days.

Maybe it will work, maybe not – it’s never been tried at such depths before so nobody really knows what the chances of success are. But even if it can plug the leak soon, the consequences for both BP and the Louisiana coastline will be severe. Huge damage has been done to BP’s reputation, and as more and more oil washes ashore the firm will be in danger of becoming US public enemy number one. Legal costs alone could run into tens of billions of dollars.

BP CEO Tony Hayward has also been feeling the pressure coming from the Whitehouse - President Obama has vowed to make BP pay in full for the clean up, and has cancelled scores of offshore drilling projects and criticised the ‘scandalously close relationship’ between oil companies and regulators.

So not only is the US government on Hayward’s case, the rest of the industry will be now, too. Like the oil spill itself, this is a mess that will run and run.

In today's bulletin:

Shell snaps up US rival as BP's woes worsen
Pru seeks last-ditch discount on £23bn AIA deal
Royal Mail set to go Greene with first female chief exec
Netto deal may bode well for new Asda boss Clarke
Psychology at Work: Mind your language

 

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