Nearly a decade after selling its dirtier Canadian oil sands assets amid the global transition to clean energy, Big Oil giant Shell is reversing course in Canada and buying ARC Resources for nearly $14 billion.

While Shell followed the energy supermajor trend of exiting Canadian oil sands in the prior decade, Shell’s acquisition of ARC places new emphasis on the natural-gas-heavy Montney region of British Columbia and Alberta, which is relatively cleaner than the thick oil sands and more resembles U.S. shale plays. Calgary-based ARC touts itself as the leading pure-play producer in the Montney.

Shell, BP, and other Big Oil players have focused lately on growing oil and gas production to boost revenues, while placing less-profitable renewable and clean energy strategies on the back burner.

The Montney region is considered an emerging oil and gas play as the biggest U.S. shale basins continue to mature and natural gas demand grows worldwide, led by exports and the AI power boom.

The ARC deal, which grows from $13.6 billion to $16.4 billion with the assumption of debt, makes it less likely—at least in theory—that Shell would reignite any talks in the near term to acquire struggling rival BP in what would be the biggest energy deal of the century. Shell CEO Wael Sawan scuttled such talks last year to focus on organic growth and more modest dealmaking.

The deal comes at a small discount to ARC’s market cap as of April 24, but closer to a 20% premium on ARC’s value over the past month.

Sawan said the ARC deal adds to Shell a “high-quality, low-cost, and top-quartile low carbon intensity producer operating in the Montney shale basin that complements our existing footprint in Canada and strengthens our resource base for decades to come.”

“This establishes Canada as a heartland for Shell while furthering our strategy to deliver more value with less emissions,” Sawan added.

Refocusing on Canada

In 2017, as the Canadian oil sands fell out of favor in terms of global perception, Shell sold its assets for more than $11 billion to Canadian Natural Resources as the trend shifted to more ownership with domestic Canadian firms.

A year later, Shell sold its stake in Canadian Natural Resources for $4.3 billion.

However, Shell did not abandon Canada entirely. Shell maintained a modest footprint in the Montney region and then became the largest owner of the big LNG Canada project, which became the country’s first exporting hub of liquefied natural gas last year.

ARC’s gas production could service LNG Canada exports and the wave of other LNG projects planned to come online in British Columbia to ship gas to Asia—a potentially valuable proposition, with more of Qatar’s gas exports offline for years to come because of damages sustained from the ongoing war in Iran.

ARC produces about 370,000 barrels of oil-equivalent daily. Of that mix, 58% is natural gas and 42% is crude oil and other liquids, such as butane and propane.

ARC adds about 1.5 million net acres in the Montney to Shell’s existing Montney footprint of roughly 440,000 net acres.

The cash-and-stock deal includes about 25% cash—$3.4 billion in cash and $10.2 billion in Shell stock. The deal is expected to close by the end of 2026.

Other top producers in the Montney include Canadian Natural, Calgary’s Tourmaline Oil, and Denver-based Ovintiv.

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