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Will Shell’s asset sales include Woodside Petroleum?

Oil giant Royal Dutch Shell (NYSE: RDS.A) announced last month that it plans to sell up to US$15 billion of assets in order to help fund planned projects that will require up to US$55 billion of additional funding over the next two years. But the announcement has raised renewed questions over the company’s holding in Australian energy producer Woodside Petroleum (ASX: WPL).

Shell CEO Peter Voser is quoted in Bloomberg confirming the sales saying, “we are entering into a divestment phase like we had a few years ago. The net capital spending is considerably going to come down in 2014. We know exactly what we are going to do”.

Shell holds a 23% stake in Woodside Petroleum and works closely with the company on projects including Browse LNG and Sunrise LNG. While Shell has not mentioned Woodside as being on the sale sheet, it is a no secret that Shell wants to exit its Woodside ownership.

Shell’s 23% stake is estimated to be worth up to $7 billion, but some analysts believe the company would sell to avoid any geopolitical tensions with Middle Eastern countries where Shell currently has significant investment.

This has risen particularly in response to Woodside’s involvement with Israel’s Leviathan gas field. In April this year analysts at Commonwealth Bank (ASX: CBA) tipped that Shell was likely to sell out of Woodside in order to distance itself from any direct or indirect dealings with the country.

Shell declined to comment on the CBA report but have previously indicated its stake in Woodside was incompatible with its long-term plans.

Foolish takeaway

Shares in Woodside are up 14% so far this year, slightly ahead of the 11.7% increase of the S&P/ASX 200 Index (ASX: XJO), so if the company was on Shell’s radar to sell, now may be an opportune time.

However, the strong cash flows that Woodside produces, as well as high growth potential the company has for the coming years, means hanging on to the stake is still an attractive option for Shell.

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Motley Fool contributor Regan Pearson does not own shares in any of the companies mentioned.

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