If Shell were to acquire BP, it would rank among Europe’s largest ever industrial mergers and establish the continent’s first oil major capable of rivaling U.S. giants Exxon Mobil Corp. and Chevron Corp. By merging their upstream businesses, the combined entity would produce almost 5 million barrels of oil equivalent per day an 85 percent jump over Shell’s current output elevating it above Chevron’s 3.4 million boe/d and slightly ahead of ExxonMobil’s 4.6 million boe/d in the first quarter.
The deal would also cement Shell’s lead in liquefied natural gas, with annual sales exceeding 90 million tonnesmore than a fifth of the global market while integrating BP’s LNG tanker fleet to drive down shipping and trading costs. Both companies boast substantial commodity-trading arms that have historically delivered 2–4 percent gains in return on capital; combining them could unlock further optimisation, though analysts question whether Shell would pay a premium primarily for trading expertise it already possesses.
Financially, Shell would likely need to offer a roughly 20 percent premium over BP’s £57 billion market value. Early estimates point to after-tax cost synergies of about $1 billion in the first year and $2 billion thereafter, plus capital-spending savings of $1 billion rising to $1.5 billion. The deal would be accretive to free cash flow per share by 2026 Shell’s stated “north star” thanks to those savings and planned cuts to capital expenditure.
Yet the acquisition carries notable risks. BP’s balance sheet carries a leverage ratio near 48 percent when accounting for debt, leases and hybrids the highest among major oil firms and it must continue compensation payments related to the 2010 Macondo spill until 2033. Shell’s traditionally conservative approach to debt raises questions about its willingness to shoulder such obligations.
Competition scrutiny could force the new group to sell assets: together, they would operate more than 65,000 fuel-retail sites worldwide, a 48 percent increase over Shell’s current network. UBS suggests that offloading BP’s marketing and retail arm could command $30–40 billion, while RBC Energy argues that divesting non-core upstream assets in markets such as Azerbaijan, India and Abu Dhabi would be both necessary and cumbersome.
Analysts warn that the volume of required disposals risks bogging down the transaction and repeating Shell’s history of undercutting value in prior mergers. Nonetheless, if successfully executed, the BP-Shell combination would redefine the global energy landscape delivering scale in production, trading and LNG while creating a truly European oil champion capable of standing toe-to-toe with the world’s largest integrated producers.
