Royal Dutch Shell is closing in on asset sales in the North Sea and Gabon that will increase confidence that its $30bn asset disposal programme is gaining momentum.

The Anglo-Dutch energy group announced on Monday that it had completed the $1.4bn exit from its Japanese refining joint venture, Showa Shell, locking in an important part of the $5bn of divestments agreed so far.

However, the potential deals in the North Sea and Gabon pose a bigger test for Shell because they involve upstream exploration and production assets that have proved hard to sell.

Shell is aiming to raise $30bn from asset sales by the end of 2018 to reduce its large debts following its £35bn takeover of BG Group, completed in February.

The disposal programme is crucial to Shell’s efforts to defend its prized dividend, which is the biggest in the oil industry and has not been cut since the second world war.

Progress has been slow, with only $1.7bn of divestments completed by Shell at the end of the third quarter, and a further $3.3bn agreed. Most of these relate to downstream refining and marketing assets, such as the 31.2 per cent stake in Showa Shell sold to Idemitsu Kosan, a rival Japanese refiner.

Reaching agreement on deals involving upstream assets has been more difficult because the downturn in oil prices since mid-2014 has depressed valuations below the level at which Shell is willing to sell.

However, the recent rebound in prices to about $55 per barrel — almost double the 12-year lows hit in January — has opened the way for transactions to be struck.

Shell is in advanced negotiations over the sale of a package of North Sea assets — a combination of older and newer fields — to Chrysaor, a small private North Sea explorer backed by EIG Global Energy Partners, a US private equity company, according to people briefed on the process. The assets could be valued at more than $2bn.

Shell would nevertheless remain a significant investor in North Sea exploration and production.

In Gabon, Carlyle Group, the US private equity fund, and Perenco, an independent European oil and gas company, have been vying for Shell assets valued at about $700m.

People briefed on the matter said both transactions could be finalised early in the new year — in line with Shell’s target to have agreed or be “progressing” $6bn to $8bn of disposals by the end of 2016. Shell declined to comment.

Better than expected third-quarter results led Shell to argue that the BG deal was beginning to pay off, but its balance sheet is under intense pressure after a tripling of net debt over the past year to $78bn.

Completion of the Showa Shell disposal ended a protracted saga since the ¥159bn deal was agreed last year.

Idemitsu wanted to buy the stake as the first step to a merger with Showa, as consolidation of Japan’s refining sector gathers pace.

That broader deal has been held up by opposition from Idemitsu’s founding family, and this had raised doubt over the Showa stake sale.

However, Shell said on Monday that the disposal was going ahead after securing antitrust approval from the Japan Fair Trade Commission.

Shell also announced on Monday the sale of its Australian aviation fuel business to Viva Energy Australia for $250m.

Source: Financial Times