Selling top-tier oil and gas assets? What is Shell planning?

Text | Mulan

Shell is considering selling its top shale assets in Argentina, reflecting a profound transformation in the oil and gas industry from resource expansion to a focus on capital efficiency and cash flow.

Recently, multiple media outlets reported that Shell is contemplating the sale of some or all of its interests in the Vaca Muerta shale assets in Argentina, with a transaction value potentially reaching billions of dollars.

Since the news broke, there has been widespread confusion both inside and outside the industry.

It’s important to note that Vaca Muerta is known as the “Permian Basin of the Southern Hemisphere,” yet it is also the second-largest shale gas field and the fourth-largest shale oil field globally, with recoverable reserves of approximately 16 billion barrels of oil and 308 trillion cubic feet of natural gas.

Shell, over the past two years, has been divesting its loss-making renewable energy businesses and shrinking its lagging chemical segment, with the core goal of refocusing on its oil and gas strengths.

Given the high quality of this resource potential, why would a giant like Shell consider selling? Behind this seemingly perplexing move may lie a deep shift in the logic of the oil and gas industry.

01

Why sell Vaca Muerta?

Shell’s consideration of selling Vaca Muerta does not mean it undervalues the resource. Geologically, Vaca Muerta is undoubtedly an excellent asset.

Its resource scale is enough to change a country’s energy landscape and even influence regional energy trade. Shell has been involved in this area since 2012, currently holding majority stakes in four blocks. By 2024, its oil and gas production is expected to reach 15.6 million barrels of oil equivalent. The company has explicitly stated that it can break even at Brent crude prices of $50 per barrel, indicating that the profit threshold is not particularly high.

However, the value of a resource is never solely determined by underground reserves; it also depends on whether it can be reliably converted into stable cash flow.

Compared to the highly mature U.S. shale region, Vaca Muerta faces significant development bottlenecks.

First, infrastructure is severely lacking. Industry estimates suggest Argentina needs about $58 billion in investments to improve its oil and gas transportation pipelines, processing plants, and ports. Currently, construction progress is far below target, leading to high logistics costs and difficulty scaling up development efficiency.

This means it is not a “quick profit” project but a marathon requiring continuous, substantial capital investment, unlikely to generate stable returns in the short term.

A more fundamental constraint is Argentina’s macroeconomic and institutional risks.

Long-term high inflation and currency fluctuations make operating costs unpredictable; although the shadow of foreign exchange controls has eased since the 2025 removal of exchange rate restrictions, the two-decade history of controls and policy reversals still leave investors questioning whether profits can be smoothly repatriated. Additionally, energy policies may swing with political changes, further amplifying long-term investment uncertainties.

In today’s environment where capital increasingly values certainty, Vaca Muerta, despite being a top-tier “resource asset,” has not become a top-tier “cash flow asset.” Shell’s bet on this shale asset essentially involves paying a high risk premium for its “top resource” label, which no longer aligns with current capital efficiency demands.

In essence, Shell’s consideration to sell is not about the underground oil and gas itself but about the expensive and uncertain future cash flow expectations attached to the resource.

02

The Era of “Capital Efficiency” Begins

Shell’s consideration to sell is a key signal of its strategic shift, marking that the oil and gas industry has fully entered a new era focused on “capital efficiency” rather than resource expansion.

A common misconception is that Shell’s “refocus on oil and gas” means acquiring assets everywhere to expand its resource footprint. In reality, this is an outdated interpretation of a new strategy.

A closer look at Shell’s recent layout shows that its strategic keywords have shifted entirely toward free cash flow, return on capital, shareholder dividends, and risk control as core evaluation metrics.

By 2025, even with a roughly 20% drop in international oil prices, Shell is expected to generate $26 billion in free cash flow, announce a 4% increase in dividends, and implement $3.5 billion in share buybacks. This continues a pattern of at least $3 billion in buybacks for 17 consecutive quarters.

This counter-cyclical performance reflects Shell’s low-key “asset optimization” maneuver.

By divesting high-risk, long-cycle, or non-core assets, capital is being concentrated into “champion assets” with high certainty, high returns, and strong synergies—such as the Gulf of Mexico, the Permian Basin, Brazil’s deepwater projects, and integrated LNG chains.

These core assets share common features: stable institutional environments, predictable cash flow returns, and no need to pay excessive risk premiums.

Compared to these “core spot assets,” Vaca Muerta is more like a “long-term option” filled with uncertainties, with risk premiums exceeding Shell’s current risk appetite.

In fact, Shell’s strategic shift is not an isolated case but a reflection of the entire oil and gas industry. For example, ExxonMobil is heavily investing in the Permian Basin and politically stable Guyana offshore; Chevron continues to deepen its focus on North America.

Capital markets are also beginning to “vote” with their funds, shifting valuation focus from external oil prices to a company’s internal cost control and cash flow generation capabilities.

This indicates that the game rules in the oil and gas sector have changed: “Cash flow is king,” and asset quality is now judged more by the certainty of on-ground cash flows and capital return efficiency than by underground resource abundance.

03

Global Reshaping of Oil and Gas Capital

Shell’s considerations also highlight the shortcomings of Argentina’s investment environment and signal a reshuffling of global oil and gas capital, offering important lessons for Chinese energy companies “going global.”

Despite possessing world-class energy resources, Argentina has yet to provide a world-class investment environment. This is not due to government reluctance but stems from economic difficulties that limit policy stability and implementation.

Although the Argentine government has made efforts, such as launching a “large-scale investment incentive scheme” in 2025 to attract eight projects worth a total of $12.4 billion related to Vaca Muerta, approving state oil company YPF to fund $3 billion for local pipeline projects, and initiating multiple oil and gas infrastructure projects to aim for an annual increase of $15 billion in oil exports…

these measures have not fully offset the premium caused by institutional risks.

Research shows that from 2001 to 2023, foreign investment interest in Argentina has sharply declined, with foreign direct investment share falling below the country’s GDP and population proportions. The “liberalization-crisis-control” vicious cycle has deterred international investors.

More notably, Shell’s decision is not an isolated case. In February 2026, Norway’s Equinor and France’s TotalEnergies also announced the sale of their Vaca Muerta assets.

Major international players are withdrawing capital from high-risk regions and reallocating to areas with more stable institutions and more predictable returns. Emerging markets are experiencing intense “risk stratification.”

For Chinese energy companies “going global,” assets like Vaca Muerta may present a window of opportunity, aligning with China’s long-term goals of ensuring energy security and strategic resource reserves, but they also carry risks.

This requires Chinese firms to strengthen their management of country risks, carefully consider three core issues: whether they have longer-term capital patience than international peers and can withstand longer investment recovery periods; whether they have established mature country risk management systems capable of handling exchange rate fluctuations, capital controls, and policy swings; and whether their evaluation mechanisms balance long-term strategic reserves with short-term financial returns.

Historical experience shows that success or failure of overseas resource investments by Chinese companies depends not only on resource quality but also on effective management of the institutional risks in host countries.

Although still in the consideration stage, Shell’s move as an industry bellwether indicates that global oil and gas capital is entering a new era where capital is scarcer and certainty is more precious.

Shell’s actions once again demonstrate that true international competitiveness lies not only in resource acquisition but also in risk management capabilities.