Illustration: Chen Xia/GT

Rumors that oil conglomerate Royal Dutch Shell Plc was mulling a bid to acquire rival oil giant BP Plc captivated the market last week. Although Shell and BP both declined to comment on the matter, this did not stop investors from sending London-traded shares of both companies higher.

If the rumored deal between Shell and BP materializes, it would surely be one of the biggest acquisitions in the history of the global energy industry. While such a merger makes sense from a cost-cutting point-of-view, especially now that global crude prices are hovering near multi-year lows, some industry experts are nevertheless skeptical about the potential benefits of such a deal considering Shell's recent asset sales, anti-monopoly concerns and BP's oil interests in Russia.

Yet, whether recent market rumors are true or not, a further round of industry consolidation looks inevitable based on current oil prices.

Global gas and oil producers are suffering greatly from a downturn in crude prices which has seen Brent drop some 40 percent since June. Indeed, deepening industry pains are expected to delay $150 billion worth of oil and gas exploration projects next year, according to a Reuters report published Thursday. Looking ahead, the situation could become even more bearish thanks to a decision late last month by the Organization of Petroleum Exporting Countries to keep crude output steady at 30 million barrels per day. After the organization opted against cutting production, Brent crude futures fell to four-year lows, while West Texas Intermediate futures dropped below $70 per barrel for the first time since 2010.

The current market climate lays the foundation for a major round of mergers and takeovers within the energy sector. In fact, Shell's rumored bid for BP comes just weeks after Halliburton, one of the world's largest providers of oil-field services, agreed to pay $34.6 billion to acquire peer Baker Hughes.

Investors seem ready to accept more such tie-ups. As alluded to above, shares of BP and Shell immediately rose by some 3 percent and 2.5 percent respectively after reports of a tentative deal between the two companies on December 2.

Despite this bullish response, some analysts have questioned the merits of a Shell-BP merger. "It seems difficult to believe that Shell would make such a big acquisition at this difficult time for the oil market," Chris Beauchamp, an analyst with IG, was quoted as saying by Reuters. What's more, Shell's sale of assets in Australia to Kuwait Foreign Petroleum Exploration Co for $1.14 billion earlier this year cast doubt on the company's willingness to engage in what would be one of the largest oil acquisition deals ever recorded.

Other obstacles to the merger include anti-monopoly scrutiny from regulatory authorities worldwide. As both companies are already giants with assets and exploration interests that span the globe, a merger between the two would inevitably draw close attention from antitrust authorities. For its part, BP also does not exactly seem to be an attractive target at the moment. For one thing, the company is burdened with a 20 percent stake in Russian oil giant Rosneft, which is now under sanctions imposed by the US and the European Union. An oil spill accident several years ago in the Gulf of Mexico also continues to exert a negative influence over BP's balance sheet - and reputation.

But despite the pros and cons associated with this rumored deal, greater consolidation in the global energy sector seems a certainty. When crude oil prices last plunged in the late 1990s, a rash of takeovers reshuffled the energy sector as larger firms took advantage of the weak market to snap up smaller peers. For instance, Exxon snared Mobil, BP acquired Amoco and Arco, Chevron bought Texaco, and Total took over Fina and Elf. With crude prices in the gutter once again, it seems fair to expect another wave of mergers and acquisitions.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn