Investment bankers in the City making case for BP-Shell tie-up

(Sharecast News) - Some of the largest investment banks in the City are sizing up the possibility of a merger between BP and Shell. The two oil majors have overlapping projects in Iraq and the Gulf of Mexico that could be combined, as well as high-performing trading units, the Financial Mail on Sunday said.

Graham Ashby, as asset manager at Schroders, who held stakes in both outfits argued that a tie-up would give the two companies the scale they needed in order to lower their cost of capital.

"The cost of capital is so high that to extract oil without scale means it is impossible to make money," Ashby said.

Citigroup and Rothschild were Shell's bankers, while BP had Robey Warshaw and Morgan Stanley.

As of 1127 BST, shares of BP were trading lower by 0.82% to 463.95p and those of Shell were edging up by 0.36% to 2,683.50p.