Shell 'In Advanced' Takeover Talks With BG

Royal Dutch Shell (Xetra: R6C1.DE - news) is mulling a possible takeover of struggling BG Group (LSE: BG.L - news) as world oil and gas prices remain weak following their collapse last year.

BG, which was created out of the old British Gas almost 20 years ago, released a statement last night which confirmed "advanced discussions" with Shell (LSE: RDSB.L - news) .

The liquefied natural gas producer released a statement to the London Stock Exchange (Other OTC: LDNXF - news) after the Wall Street Journal reported that talks had taken place.

BG added there was no certainty that a deal would be struck but gave no further details.

Representatives for Shell, which is Europe's largest oil company by market value at almost £180bn, declined to comment.

Energy companies are looking to reduce costs and become more efficient in the wake of tumbling oil prices - down by as much as 60% at one stage last year.

One route is through consolidation, which created the oil majors of the present day when oil prices last suffered significant damage in the late 1990s.

The biggest of those deals was the $80bn mega-merger between Exxon and Mobil.

At the end of 2014, there had even been market rumours of a merger between Shell and BP.

While both those firms have trimmed some costs to help soak up price weakness, BG was encountering problems before June when the collapse began.

Those included bigger-than-expected costs from a huge gas project in Australia and major writedowns in its American and Egyptian businesses.

Its new chief executive Helge Lund only started work in February.