The Equinor ASA offshore oil drilling rig is located in the Johan Sverdrup field in the North Sea off the coast of Norway on Monday, February 13, 2023.
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Petroleum Major shell Statoil and Statoil announced plans on Thursday to merge their UK offshore oil and gas assets to create a joint energy company.
The joint venture will be established in Aberdeen, Scotland, to maintain fossil fuel production and energy supply security in the UK
The companies plan to complete the deal by the end of next year, subject to approval. Shell said the combined company would then become the largest independent producer in the UK North Sea.
The company’s daily production is expected to exceed 140,000 barrels of oil equivalent in 2025.
Shell shares were down 0.8% at around 8:40 a.m. London time, while Equinor shares were up 0.3%.
“Domestic production of oil and gas is expected to play an important role in the future of the UK energy system,” Zoë Yujnovich, director of integrated gas and upstream at Shell, said in a statement.
Juinovich added: “The new joint venture will help play a key role in a balanced energy transition, providing millions of British homes with a secure supply of heat, industrial power and the fuels that people rely on.”
The joint venture will include Equinor’s stakes in Mariner, Rosebank and Buzzard and Shell’s holdings in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair and Schiehallion.
Equinor currently employs around 300 people in the UK, while Shell employs around 1,000 people in oil and gas roles across the country.
“This transaction enhances Equinor’s near-term cash flow and by combining the long-term expertise and competitive assets of Equinor and Shell, this new entity will play a vital role in securing the UK’s energy supply,” Exploration and Exploration said Philippe Mathieu, Executive Vice President.
Joint venture ‘appears to make strategic sense’
Analysts led by RBC Capital Markets’ Biraj Borkhataria said they expected “tax synergies” to be an important factor in the merger of Shell and Equinor’s UK offshore oil and gas assets.
Analysts at RBC Capital Markets said: “There has been much discussion in recent months about the UK government’s fiscal policy around North Sea oil and gas development, with many large companies pointing to recent increases in windfall profits taxes that will limit future investment. ” said in a research report published on Thursday.
“In this case, as the UK is not considered a major growth market, this merger appears to make strategic sense as it allows both companies to pool resources and continue to grow while reducing focus/capital to the region and following the recent of initiatives are manufactured in the country by companies such as Eni,” they added.
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