Shell and Equinor’s oil & gas merger giving birth to ‘biggest independent producer’ in UK North Sea

Two European energy giants, the UK-headquartered Shell and Norway’s state-owned Equinor, have set their cap on merging their offshore oil and gas assets in Great Britain to bring to life a combined company they claim will be the largest independent oil and gas player in the UK sector of the North Sea.

The European giants’ subsidiaries, Equinor UK and Shell UK, will combine their offshore oil and gas businesses and expertise on the UK Continental Shelf (UKCS) to form an incorporated joint venture (IJV). The duo believes their new company will be the UK North Sea’s “biggest independent producer,” which they plan to set up to sustain domestic oil and gas production and security of energy supply in Britain.

Once the process is complete, the new independent producer will be jointly owned by Equinor (50%) and Shell (50%). The companies ascribe the motivation behind their UK merger to the need for the continued economic recovery of hydrocarbon resources in UK waters while the once prolific basin is now maturing and production is naturally declining.

Therefore, they see this combination of portfolios and expertise as a way to enable the new company to be “more agile, focused, cost-competitive and strategically well positioned to maximize the value of its combined portfolios” on the UKCS.

Zoë Yujnovich, Shell’s Integrated Gas and Upstream Director, highlighted: “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.

“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 new company will be based in Aberdeen, which is seen as the heart of the nation’s energy sector. The assets this JV will manage include Equinor’s equity interests in Mariner, Rosebank, and Buzzard, alongside Shell’s equity stakes in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion. Aside from these, a range of exploration licenses will also be part of the transaction.

The Norwegian giant’s Rosebank project continues to move forward, as illustrated by a major subsea campaign that was recently wrapped up, with the installation of all nine subsea structures ahead of schedule.

The operator seeks to maintain the schedule for the estimated 2026/27 first production date, but whether it will be able to do so remains to be seen in light of the ongoing lawsuit saga, as a ruling from a court in Scotland could stop this development in its tracks and do the same for Shell’s Jackdaw field.

While confirming the creation of “a new energy major in the United Kingdom,” Anders Opedal, President and CEO at Equinor, stated: “The new, independent operator […] will be the largest oil and gas company on the British continental shelf. Together, the new company will operate eight producing assets, with an expected combined production of over 140 000 barrels of oil equivalents per day in 2025.

“[…] I understand that this message brings uncertainty to some of our employees. We are committed to work on the integration with care and in the best interests of our employees. We believe this is the best way to ensure long term sustainability of the business.”

Furthermore, Equinor will retain ownership of its cross-border assets: Utgard, Barnacle, and Statfjord, alongside its offshore wind portfolio, including Sheringham Shoal, Dudgeon, Hywind Scotland, and Dogger Bank. In addition, the firm will retain its hydrogen, carbon capture and storage (CCS), power generation, battery storage, and gas storage assets.

On the other hand, Shell will keep its ownership interests in the Fife NGL plant, St Fergus Gas Terminal, and floating wind projects under development: MarramWind and CampionWind. Additionally, the company will remain the technical developer of Acorn, said to be Scotland’s largest carbon capture and storage project.

Even though the UK oil major is retaining offshore renewable projects in its portfolio, it has made up its mind to put an end to further investments in new offshore wind developments as part of a review of its energy business.

A Shell spokesperson confirmed the pause on new offshore wind projects for Offshore Energy‘s sister site, offshoreWIND.biz, and said the firm would direct its attention toward “maximising the value” of its existing renewable assets. Based on the spokesperson’s statement, Shell remains “cautiously open” to profitable equity positions.

The new chapter Shell and Equinor have decided to open in the British energy sector will allow them to move forward as investing partners rather than individual operators, bankrolling the new company to invest in providing what the duo has highlighted will be a long-term future for the individual oil and gas fields and platforms, helping extend the life of the sector for the benefit of the UK.

Philippe Mathieu, Equinor’s Executive Vice President for Exploration and Production International, commented: “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 decarbonisation.

“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.”

Equinor currently produces approximately 38,000 barrels of oil equivalent per day in the UK, while Shell produces over 100,000 barrels of oil equivalent on a daily basis. As a result, the new company is expected to produce over 140,000 barrels of oil equivalent per day in 2025.

Since Equinor employs about 300 people in oil and gas roles in the UK and Shell employs approximately 1,000 in similar oil and gas positions across the country, the combined company’s headcount should be around 1,300.

Moreover, the more balanced ownership structure of the assets is anticipated to contribute to reduced overall risk exposure. The transaction has an economic effect on January 1, 2025. However, the completion, expected by the end of 2025, remains subject to approvals.

Last month, Shell began putting the wheels in motion for a potential final investment decision (FID) to be taken in relation to its recent gas discovery in the UK North Sea.

The Barque-Clipper-Bacton gathering system and onshore gas processing plant are perceived to have sufficient capacity to accept gas production from the proposed Selene development.