Shell buys Nature Energy: Europe's largest biomethane producer joins the major

On 28 November 2022 Shell announced that it would acquire 100% of the shares in the Danish Nature Energy, Europe's largest biomethane producer. The value of the transaction was estimated at about EUR 1.9 billion, or nearly USD 2 billion. The acquisition fits the company's strategy of developing low-carbon fuels and shows that the biogas and biomethane market is beginning to attract the largest fuel and energy companies. It is one of the largest transactions in the history of the industry in Europe.

What is changing

Nature Energy builds and operates biogas installations in which it produces biomethane, injected into the gas grid, from manure, slurry and waste from agriculture and the food industry. The Danish market is among the best developed in Europe: the share of biomethane in the grid exceeds one quarter, and the government announces further growth. For Shell the acquisition means access to existing assets, design and operating expertise, and a portfolio of new projects.

The transaction expresses a broader trend: the interest of fuel companies in biomethane is growing, because it is one of the few renewable fuels that can be applied directly in existing gas infrastructure. Earlier, in October 2022, bp announced the purchase of the American RNG producer Archaea Energy.

Significance for the industry in Poland

For Polish investors and biogas plant owners the transaction shows that biomethane assets have a high value and that large players with capital and technology are entering the market. For the domestic sector this may mean both competition for feedstocks and locations and the possibility of cooperation or of selling projects.

It is also worth noting that Danish success rests on several elements: stable support for biomethane, strong cooperation with agriculture (manure and slurry as the main feedstocks), an integrated gas grid and a certification system. Poland, where the legal framework for biomethane is only now being created, can draw on these models.

What the transaction implies for asset valuation

The transaction price shows that the market values not only existing installations but also the pipeline of development projects, the competence of the team and access to feedstocks. For owners of smaller biogas plants this means that their assets, with guaranteed access to feedstock, grid connection and permits, may have strategic value. For banks and funds it is a signal that biomethane is an asset class that can be financed on a large scale, provided there is a predictable support system.

What next

Closing the transaction requires regulatory approval, which, as announced, should happen in early 2023. The market will watch how Shell intends to develop Nature Energy's assets: in Denmark and in other countries. For Europe the transaction may accelerate market consolidation and increase the importance of long-term contracts for biomethane supply to industry.