Merger rumours grow as Shell talks with Texaco.
The confirmation came amid speculation that Texaco and Shell could be on the verge of a full scale merger which would create the world's largest oil company with a market capitalisation of pounds 120billion.
Merger talk in the sector has been circulating since BP and Amoco agreed a deal earlier this month.
The Shell/Texaco talks were confirmed by Shell spokesman Mr Reinier Treur. He cautioned: "The content of the talks is commercially sensitive.
"This rumour has been going around for some time. Like the rest of the sector, we are faced with declining margins. We are in talks about this with various parties, of which Texaco is one."
A Texaco spokesman described the rumours of a mega merger as "wild speculation".
He declined to discuss whether Texaco may be considering a more limited form of alliance with Royal Dutch/Shell.
He said his company was reviewing a variety of options for improving its downstream operations in Europe, but added that the review was not complete, and no decision had been made.
Meanwhile, the chairman of the company that owns nearly half of Thistle Hotels has agreed to step down amid pressure from a major investor.
Sir Roger Douglas is to quit his post with Brierley Investments of New Zealand after a strategic review is completed.
Last week the Malaysia-based Camerlin Group, which is Brierley's biggest shareholder, put in a formal request for a shareholders' meeting to vote on Sir Roger's removal from the board.
Brierley owns 46 per cent of Thistle, Britain's second largest hotel chain. Takeover talks for the group, valued at about pounds 1.5billion, fell through earlier this month.
Negotiations took place between Thistle and a number of potential buyers. Thistle was thought to be close to announcing a sale when the preferred buyer, reportedly Nomura Securities of Japan, reduced its offer and the deal fell through.
"Sir Roger will remain executive chairman to oversee the changes to the company and the employment of a new chief executive," Brierley said in a statement.
"Following this, Sir Roger will step down as chairman once a suitable replacement has been identified."
Sir Roger became chairman of Brierley in April after his predecessor Mr Bob Matthew and chief executive Mr Paul Collins resigned.
At the time he said his executive role was temporary, but not his chairmanship.
Leeds-based Thistle has 90 hotels across the country, many in London and Scotland, and includes the New Hall at Sutton Coldfield.
Camerlin has withdrawn its notice to call a shareholders' meeting.