In May 2025, reports came out that Shell is seriously thinking about acquiring BP, one of its main competitors in the energy sector. This comes at a time when BP’s market value has dropped, and the company is dealing with business and financial challenges.
Shell is currently valued at around £149 billion, which is almost twice as much as BP, whose value is around £59 billion. This difference in size makes Shell strong enough to consider taking over BP.
Why Is Shell Considering This Acquisition?
Business Strategy and Market Growth:
Shell’s interest in BP is likely linked to its plan to grow stronger in key energy markets, especially in liquefied natural gas (LNG). By acquiring BP, Shell could expand its reach, lower its operating costs, and better compete with other global companies like ExxonMobil and Chevron.
BP’s Struggles:
In recent years, BP focused more on renewable energy under former CEO Bernard Looney. However, that shift did not bring strong returns. As a result, investors showed dissatisfaction, and the share price fell. The new CEO, Murray Auchincloss, is now focusing again on oil and gas to try to improve the company’s performance and stabilizing its financial standing.
How Would This Acquisition Affect the Energy Market?
Cost Savings:
Shell's acquisition of BP will entirely form a new combined company and this could save about £6 billion by cutting duplicate operations and improving efficiency.
Market Influence:
This deal would create one of the largest energy companies in Europe. This could change the global energy market and increase competition with large oil companies in the United States.
What Are the Financial Factors Involved?
BP Is Undervalued:
Although BP’s market value is £59.6 billion, its actual assets are worth about £120 billion. This means BP might be undervalued, making it a good and attractive deal for Shell to buy BP.
BP Has a Lot of Debt:
BP has about $77 billion in debt, much of it from the Deepwater Horizon oil spill. Shell would need to think carefully about how to handle this debt if it goes through with the deal.
Are Other Companies Also Interested in BP?
Yes. Apart from Shell, other large global energy companies are also said to be exploring the idea of buying parts of BP’s business. These include:
Chevron
ExxonMobil
TotalEnergies
Adnoc (Abu Dhabi’s state oil company)
Vitol (a major commodity trading firm)
Some are interested in specific parts of BP’s business, like its oil fields in the Gulf of Mexico or its U.S. shale operations.
What Challenges Could This Deal Face?
Regulatory Approval:
A deal this big would definitely get investigated by regulators, especially to check if it would limit competition or create a monopoly.
Internal Concerns:
Shell’s CEO, Wael Sawan, has said he prefers buying back company shares rather than making large purchases. This shows that not everyone inside Shell may support the deal.
Also, a major investor in BP, Elliott Management, owns more than 5% of BP. This group could influence whether the deal happens or not.
Final Thoughts
Shell’s possible plan to buy BP could lead to big changes in the energy industry, creating a stronger European energy leader. But the deal also comes with big risks and challenges – including handling BP’s debt, getting approval from regulators, and getting everyone on board.
The world will be watching closely to see what happens next.
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