Despite the recent rally in oil prices—raising an optimistic aura in the global energy market—the Big Oil are still on the move toward their austere cost-cutting measures; a clear indication that they did not fall for the price rally trap. The Country Caller believes this to be quite a sane decision taken by energy majors including BP plc (ADR) (NYSE:BP) and Royal Dutch Shell plc (ADR) (NYSE:RDS.A).

Especially for Shell, things have not only hit the rough patch due to low crude environment, but also due to its takeover of BG gas group in a deal worth $54 billion. The deal’s closure in February ripped the energy giant out of cash, escalating its debt pile to varying extents.

As per the latest updates, the company has even exited from the SABIC project. It recently sold its 50% share of interest to Saudi Basic Industries Corp. in the petrochemical venture called SADAF. Disposal proceeds from the deal are expected to stand near $820 million, which would help bolster the Anglo-Dutch’s cash flow and balance sheet position.

The latest move marks the third exit made by Shell in two years. From now onward, SABIC will fully own Saudi Petrochemical Co. Although the partnership was to expire in 2020, it expired earlier due to Shell’s withdrawal from it. Production from the petrochemical venture stands near 4 million metric tons per annum.

Furthermore, the latest move by Shell now confuses us about its future plan in the Middle East and the Gulf region. Having a strong foothold in these areas, the current updates are sending in “mixed signals” regarding the company’s present role there. Two years ago, Shell terminated its plans to develop a petrochemical utility in Qatar, following which it exited a natural gas plant in Abu Dhabi.

(TCC)