Shell has agreed to buy Canadian shale producer ARC Resources for $16.4bn, five years after Europe’s biggest gas and oil producer sold its North American shale business.

The deal, which includes $13.6bn in cash and shares and taking on ARC’s $2.8bn debt, would be Shell’s biggest acquisition since it bought BG Group a decade ago.

ARC would add about 370,000 barrels a day of oil and gas to the London-listed giant’s production.

Shell said that the deal will boost production growth from 1% a year to 4% and add 2bn barrels to its proven and probable reserves.

Analysts and investors have previously said that Shell needed an acquisition, or exploration breakthrough, to bolster its production and reserves due to its ageing existing fields.

Wael Sawan, the chief executive of Shell since 2023, said the deal to buy Calgary-based ARC, which is focused on the Montney shale basin in British Columbia and Alberta, would make Canada a “heartland” for Shell. He added it would strengthen Shell’s “resource base for decades to come”.

“We are accessing uniquely positioned assets and welcoming colleagues that bring deep expertise which, combined with Shell’s strong basin level performance, provides a compelling proposition for shareholders,” he said.

The move marks a return to shale in North America, after Shell sold its US shale business in the Permian Basin in Texas to ConocoPhillips in 2021 for $9.5bn.

ARC mainly produces gas and condensate, a liquid that can be used in refineries to make ethylene, and Shell’s deal marks its latest push to become one of the largest players in liquefied natural gas.

In 2015, Shell acquired gas group BG, formerly the exploration arm of British Gas, for £47bn in what was then one of the largest takeovers in the oil sector for two decades.

The company also owns a 40% stake in LNG Canada, a $40bn liquefied fossil gas plant on the west coast of Canada.

Shell said that it either “owns” or is “involved with more than 30% of global LNG capacity, and is the world’s largest trader of the fuel.

Earlier this year, Sawan said that the company had spent about $2bn buying assets last year that would add about 40,000 barrelsa day of new production by the end of the decade.

“We think they’re paying a fair valuation given the deep inventory that ARC has and the likelihood of a counterbid to be low,” said Eric Nuttall, a senior portfolio manager at investment group Ninepoint Partners.

Shell, which is due to report its results for the first quarter on 7 May, is expected to report “significantly higher” profits from its trading desks due to the market volatility triggered by the Iran crisis.

Shares in Shell were down 1.2% on Monday afternoon.