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Petroleum industry

Royal Dutch/Shell to Form $3 Billion Gas and Power Joint Venture with Bechtel

Strategic Insights

— 1 min read

Royal Dutch/Shell is set to transfer its downstream gas and power arms to a new joint venture with US construction group Bechtel, in a move that represents the company's most aggressive attempt to capitalize on the growing demand for gas in power generation. The partnership, expected to be announced later this year, will see the two companies inject their existing 50-50 power generating joint venture, InterGen, into an enlarged operation that will also include Shell's Coral Energy gas marketing arm and its Tejas downstream gas division. The new venture will be initially owned 75% by Shell and 25% by privately held Bechtel.

Key Takeaways:

  • The joint venture, valued at $3 billion, will combine Shell's downstream gas and power arms with Bechtel's construction capabilities to create a global gas and power business.
  • The partnership aims to grow the operation globally, both organically and through acquisition, with a focus on gas markets in the US, Europe, Argentina, Brazil, South Africa, India, China, and Malaysia.
  • InterGen, the existing power generating joint venture, is set to become the vehicle for Shell's drive to harness gas demand, targeting a five-fold expansion of its 1 gigawatt generating capacity by 2002.
  • Bechtel will benefit from lucrative construction contracts for modern Combined Cycle Gas Turbine power stations, a key growth area for the company.
  • The joint venture represents Shell's most aggressive attempt to capture the benefits of the "dash for gas" in power generation.
  • The partnership is expected to be announced later this year, with a separate stock market flotation possible in 2001.

Statistics:

  • The joint venture will be valued at $3 billion.
  • InterGen, the existing power generating joint venture, has a generating capacity of 1 gigawatt.
  • The partnership aims to grow InterGen's generating capacity by a factor of five by 2002.
  • The new venture will initially be owned 75% by Shell and 25% by privately held Bechtel.
  • The joint venture plans to target growth in gas markets in the US, Europe, Argentina, Brazil, South Africa, India, China, and Malaysia.

Sources:

  • Reuters news service
  • Royal Dutch/Shell press release
  • Industry sources (exact names not provided)
  • InterGen joint venture documentation

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