In separate statements published on their respective websites on Thursday, Equinor and Shell announced that Equinor UK Ltd, a subsidiary of Equinor ASA, and Shell U.K. Limited, a subsidiary of Shell plc will “combine their UK offshore oil and gas assets and expertise to form a new company”.
That company will be the UK North Sea’s biggest independent producer, the statements highlighted, adding that the incorporated joint venture (IJV) “will be set up to sustain domestic oil and gas production and security of energy supply in the UK”.
On deal completion, the new independent producer will be jointly owned by Equinor (50 percent) and Shell (50 percent), the statements noted. Equinor currently produces around 38,000 barrels of oil equivalent per day and Shell UK produces over 100,000 barrels of oil equivalent per day, in the UK, the statements pointed out. The new IJV is expected to produce over 140,000 barrels of oil equivalent per day in 2025, the statements said.
Following completion, the new company will be self-funded, Equinor’s ownership stake will be equity accounted, and no organic capital expenditures related to this investment will be reported by Equinor, Equinor noted in its statement, adding that this transaction enables Equinor to benefit from increased short-term production and cash flow.
“The more balanced ownership structure of the assets also contributes to reduced overall risk exposure,” the company said in its statement.
Equinor employs around 300 people in oil and gas roles in the UK, while Shell employs approximately 1,000 in similar oil and gas positions across the country, the statements pointed out. Rigzone asked Shell and Equinor what the combination will mean for these roles.
“We don’t anticipate any staff reductions as a direct result of this announcement,” a Shell spokesperson told Rigzone.
“However, there are a number of ongoing reorganizations which have already been announced and these are continuing. We expect only limited additional job reductions ahead of this transaction,” the spokesperson added.
An Equinor spokesperson told Rigzone, “Equinor is not planning any down-manning as part of this transaction”.
“All employees working on UKCS activities for us are in scope for transfer to the new company,” the spokesperson added.
The joint venture will include Equinor’s equity interests in Mariner, Rosebank, and Buzzard, and Shell’s equity interests in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion, the statements revealed, adding that “a range of exploration licenses will also be part of the transaction”.
Equinor will retain ownership of its cross-border assets, Utgard, Barnacle, and Statfjord, and offshore wind portfolio including Sheringham Shoal, Dudgeon, Hywind Scotland, and Dogger Bank, according to the statements, which highlighted that it will also retain the hydrogen, carbon capture and storage, power generation, battery storage, and gas storage assets.
Shell UK will retain ownership of its interests in the Fife NGL plant, St Fergus Gas Terminal, and floating wind projects under development – MarramWind and CampionWind, according to the statements. The company will also remain Technical Developer of the Acorn carbon capture and storage project, the statements revealed.
Completion of the transaction remains subject to approvals and is expected by the end of 2025, the statements noted.
“With the once prolific basin now maturing and production naturally declining, the combination of portfolios and expertise will allow continued economic recovery of this vital UK resource,” the statements said.
“The new company will be more agile, focused, cost-competitive, and strategically well positioned to maximize the value of its combined portfolios on the UK Continental Shelf,” they added.
“The new company will invest to provide a long-term sustainable future for individual oil and gas fields and platforms, helping extend the life of this crucial sector for the benefit of the UK,” they continued.
“Both Shell and Equinor are proud to continue the development of the North Sea as investing partners rather than individual operators, opening a new chapter in which they will remain significant players in the UK energy sector,” they went on to state.
Equinor’s Executive Vice President for Exploration and Production International, Philippe Mathieu, said in the statements, “Equinor has been a reliable energy partner to the UK for over 40 years, providing oil and gas, developing the offshore wind industry, and advancing decarbonization”.
“This transaction strengthens Equinor’s near-term cash flow, and by combining Equinor’s and Shell’s long-standing expertise and competitive assets, this new entity will play a crucial role in securing the UK’s energy supply,” he added.
Shell plc’s Integrated Gas and Upstream Director, Zoë Yujnovich, said in the statements, “domestically produced oil and gas is expected to have a significant role to play in the future of the UK’s energy system”.
“To achieve this in an already mature basin, we are combining forces with Equinor, a partner of many years,” Yujnovich added.
“The new venture will help play a critical role in a balanced energy transition providing the heat for millions of UK homes, the power for industry, and the secure supply of fuels people rely on,” the Shell representative continued.
Commenting on the combination, David Whitehouse, the CEO of industry body Offshore Energies UK, said in a statement sent to Rigzone that “this new company will play a major role in securing the UK’s homegrown energy future”.
“To remain globally competitive this industry is changing so the UK can make the most of the North Sea, its world class supply chains, and the opportunities of a homegrown energy future,” he added.
“The North Sea is a national economic asset and as we move to net zero the government says we need oil and gas for decades to come. As we broaden our energy mix, with offshore wind, hydrogen and carbon capture projects, it remains essential that firms are backed to invest here with long term, stable policy,” Whitehouse went on to say.
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