Last week, noted short seller Jim Chanos, president and founder of Kynikos Associates, said he is short oil giants Royal Dutch Shell (NYSE: RDS-A) and Dow component Chevron (NYSE: CVX).

Chanos is skeptical of Shell’s $70 billion acquisition of rival BG Group. The biggest energy sector acquisition in a decade was announced last month. By enterprise value, Shell’s takeover of BG is expected to be the third-largest energy sector deal ever. [Shell/BG News Barely Moves Energy ETFs]

Chanos is not impressed. He said the access Shell is gaining to Brazilian reserves by way of the BG buy may not pan out and even if it does, it may not be as profitable as Shell is hoping it will be. The short seller also expressed a bearish view on global liquefied natural gas demand, which would be problematic for both Shell and Chevron, the second-largest U.S. oil company.

In other words, Chanos probably would not be a fan of the $1.2 billion iShares Global Energy ETF (NYSEArca: IXC). IXC features Chevron as its second-largest holding at a weight of 7.7% and a combined weight of 7.5% to two Shell securities. IXC is up 3.8% this year, just behind the 4% gained by the U.S.-focused Energy Select Sector SPDR (NYSEArca: XLE).

Energy stocks are not considered inexpensive.

“Profit expectations have fallen dramatically–though the pace slowed recently–which in turn has pushed the sector’s P/E ratio much higher even as stock prices have declined,” according to AltaVista Research.

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