Royal Dutch Shell is selling its Permian Basin oil holdings to ConocoPhillips for $9.5 billion.

The transaction comes with oil prices high, Permian production strong and Shell under pressure to move faster to cut carbon emissions.,


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Royal Dutch Shell is selling its Permian Basin oil holdings to ConocoPhillips for $9.5 billion.

An oil rig that was contracted to Shell in the Permian Basin near Wink, Texas.Credit…Tamir Kalifa for The New York Times

Sept. 20, 2021, 4:44 p.m. ET

HOUSTON — Royal Dutch Shell sold its oil and gas production in the Permian Basin, the biggest American oil field, to ConocoPhillips for $9.5 billion in cash on Monday.

The deal marks a turning point for Shell, which had put considerable effort into developing the field since buying acreage from Chesapeake Energy nine years ago, expanding its production to about 200,000 barrels a day.

The sale is the latest sign that Shell, like other European oil companies, is under pressure to sell off oil and gas production and move toward producing cleaner energy in response to growing concerns about climate change among investors and the general public.

A wave of acquisitions in the Permian Basin began in the wake of the 2020 pandemic as companies sought to cut costs. The scale of the Shell deal is similar to Conoco’s acquisition of Concho Resources for $9.7 billion in October, a deal that made Conoco a major player in the Permian, which straddles Texas and New Mexico. In April, Pioneer Natural Resources bought DoublePoint Energy for $6.4 billion.

With the acquisition of Shell’s acreage, Conoco consolidates its position as a top-tier Permian producer along with Pioneer, Occidental Petroleum, Exxon Mobil and Chevron.

Shell’s sale of its West Texas Permian holdings, which provided an estimated 6 percent of the company’s global oil and gas production last year, had been expected for months. Shell recently sold its stakes in offshore oil and gas fields in Malaysia and the Philippines.

Shell has been talking about cutting emissions since 2017, and it has accelerated its shift to cleaner fuels over the last two years, although not enough to satisfy many environmentalists. In addition to a goal of net-zero emissions by 2050, it has set a target of reducing oil output up to 2 percent a year by 2030 through divestments and lower investments in exploration and production.

Shell plans to increase its investments in renewables and low-carbon technologies to roughly 25 percent of its budget by 2025.

At least some of the money from asset sales goes into Shell’s power businesses, including electric vehicle plug-in points, battery businesses and utilities. This week, Shell announced plans to build a biofuels facility in the Netherlands, which will be used to make cleaner aviation fuel and renewable diesel, both made from waste from used cooking oil and animal fat.

At least some of the impetus for Shell’s shedding of hydrocarbon assets came from a decision by a Dutch court in May ordering the company to cut greenhouse gas emissions 45 percent by 2030 compared with 2019 levels, before the Covid-19 pandemic slashed oil and gas demand. Shell is appealing the ruling.

When Shell or other oil companies sell a field or petrochemical plant, the transaction does not automatically mean that global emissions will be reduced since other companies routinely pick up the production.

In a recent article published on LinkedIn, Shell’s chief executive, Ben van Beurden, wrote that if Shell stopped selling transportation fuels “it would not help the world one bit” because “people would fill up their cars and delivery trucks at other service stations.”

Shell, like the entire oil and gas industry, has suffered through a rocky time of late. The pandemic forced the company to cut its dividend last year. But with oil and natural gas prices recovering, the company has returned to robust profitability, reporting earnings of $5.5 billion in the second quarter, up from $638 million a year earlier.

Shell is retreating from the Permian as American shale oil production is recovering. The field produced 4.7 million barrels a day in August — more than 40 percent of total American oil production and a nearly 400,000-barrel-a-day increase from January.

Stanley Reed contributed reporting.

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