Shell Buys Nature Energy in US$2 Billion Push into Biogas

LONDON – As the oil giant continues to transition away from fossil fuels, Shell Plc will acquire Nature Energy Biogas A/S from hedge fund Davidson Kempner Capital Management for close to US$2 billion.

According to a statement, the agreement will make Shell the biggest producer of renewable natural gas (RNG) in Europe. It takes advantage of Shell’s strategy to use its current experience in producing and marketing gas for a low-carbon economy.

Although it is made from organic waste from agriculture, biogas is chemically identical to conventional natural gas. The US, through the Inflation Reduction Act, and the European Union both recognize renewable fuel as a means of boosting energy supplies and reducing emissions in the upcoming years, making it a platform primed for growth.

“Acquiring Nature Energy will add a European production platform and growth pipeline to Shell’s existing RNG projects in the United States,” said the downstream director of Shell, Huibert Vigeveno.

“As energy transition policies and consumer preferences indicate that demand will increase significantly in the coming years, we will use this acquisition to create an integrated RNG value chain on a global scale.”

The transaction, which is anticipated to be finalized in the first quarter of 2019, is in line with an earlier this year acquisition of Archaea Energy Inc. by rival BP Plc. for about $4.1 billion, including debt.

“Both Shell and BP announced these acquisitions within their prior capital ranges, which should give investors some comfort around shareholder returns going forward,” RBC Europe Ltd. analyst Biraj Borkhataria wrote in a note. “Time will tell whether or not they are good deals, just as it will with any adjustments to the fiscal policies governing energy in the US and Europe.”

The acquisition will expedite Shell’s current biogas business, which consists of one operational site, four under construction, as well as trading and supply units.

In addition to a pipeline of new projects in Europe and North America that could more than double that output by the end of the decade, Nature Energy currently operates 14 plants that generate about 6.5 million British thermal units of gas annually.

In spite of this, Shell’s existing oil and gas production facilities would generate ten times as much energy as Nature Energy’s current operational portfolio, which is small by natural gas production standards. Following the completion of the acquisition, Shell anticipates that Nature Energy will generate double-digit returns for the business.

According to a March report by Bloomberg News, BlackRock Inc., Shell, and BP, as well as Nature Energy, were all interested in purchasing the company., EQT AB and Global Infrastructure Partners.Reference: https://www.straitstimes.com/business/shell-buys-nature-energy-in-us2-billion-push-into-biogas