The major news of the week was the mega-merger between Royal Dutch Shell (NYSE: RDS.A) and BG Group (LON: BG). The $70 billion price tag of BG Group made the purchase the largest in over a decade. Why did Shell decide to pay such a steep price for BG? The deal will make the combined company the largest producer of liquefied natural gas (LNG) in the world. The move is a shot across the bow for the other oil majors as Shell is going all-in on the future of LNG as a vital source of energy, particularly for the fast growing economies in Asia. The purchase of BG is also a reminder that the oil majors are really oil and natural gas majors. BG will give Shell major LNG positions in Australia, and to a lesser extent in East Africa. By 2018, Shell will have twice the liquefaction capacity as ExxonMobil.

The momentum around the world to reduce greenhouse gas emissions makes LNG particularly attractive. Since it burns much cleaner than coal, it has the potential to significantly reduce smog in the bustling cities of China, Korea, and elsewhere. Although LNG trade has been growing relatively quickly in recent years, it has still been quite small compared to the amount of oil and coal that moves around the world. The prospect that LNG would become one of the most important global fuel sources might have seemed silly until recently. But China actually reduced its coal consumption in 2014 and its Herculean effort to rein in smog puts Shell’s purchase in perspective: coal is on its way out, and natural gas could become the second largest source of energy in the world. Efforts to reduce greenhouse gases will only increase in the coming years, further bolstering the push towards LNG.

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Still, the deal can also be viewed through the lens of growth. The oil majors have struggled in recent years to make big new discoveries and book new oil and gas reserves. Despite high levels of capital spending, there have been precious few giant discoveries. The path towards growth, then, for many of the largest firms is to grow through consolidation. Shell will be able to expand its oil and gas reserves by 25% from the BG deal. Nevertheless, the deal is not done yet, and Shell must overcome uncertainties from investors plus scrutiny from antitrust regulators in multiple countries.

While Shell’s LNG push will give coal executives headaches, the Sierra Club and former New York City Mayor Michael Bloomberg are posing a much more immediate threat to Big Coal’s prospects in the United States. Bloomberg announced this week a second installment of funding to Sierra Club’s “Beyond Coal” campaign, a crusade to shutter as many coal plants as possible across the country. Following the $30 million donation (which comes after a $50 million donation a few years ago), the Sierra Club announced a new goal of forcing the closure of half of U.S. coal-fired power plants by 2017, from a 2010 baseline of 523 plants. The Club had originally targeted just one-third of coal plants by 2020. The campaign underscores the increasing inhospitable environment for coal in the U.S., where the dying industry is finding it harder and harder to be heard.

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