Shell to merge UK assets with Equinor, scales back on offshore wind plans

• New independent UK producer to be jointly owned by Equinor (50%) and Shell (50%)
• The new Aberdeen-based company is expected to produce over 140,000 Boe/d in 2025
• Shell signals that it will scale back on offshore wind development

Shell said it will combine its UK offshore oil and gas assets with Equinor to form a new independent company while at the same time pulling back from offshore wind development internationally. 

Shell and Equinor on Thursday said they are to combine their UK offshore oil and gas assets to form a new independent company which they say will be more agile, focused and cost-competitive. 

Based in Aberdeen, 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. A range of exploration licences will also be part of the transaction, the companies said. 

The new independent producer will be jointly owned by Equinor (50%) and Shell (50%),

The new company, following completion, will be self-funded and no organic capital expenditures related to this investment will be reported by Equinor, the company said. 

“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 new company will be more agile, focused, cost-competitive and strategically well positioned to maximise the value of its combined portfolios on the UK Continental Shelf,” the companies said. 

Completion is expected by the end of 2025 subject to regulatory approvals. The new entity is expected to produce over 140,000 Boe/d in 2025. In the UK, Equinor currently produces 38,000 Boe/day while Shell produces over 100,000 Boe/day.

Following the transaction, Shell will retain ownership of its interests in the Fife NGL plant, St Fergus Gas Terminal and the MarramWind and CampionWind floating wind projects which are under development. The energy major will also remain technical developer of Acorn carbon capture and storage (CCS) project in Scotland.

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Equinor said it 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. It will also retain the hydrogen, carbon capture and storage, power generation, battery storage and gas storage assets.

“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. 

The announcement comes after Ithaca’s closed the acquisition of Eni’s UK assets in October. 

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Under the agreement, Eni will contribute its UK business, including assets gained from the USD 4.9 billion acquisition of Neptune Energy,  in exchange for 38.7% of the share capital in Ithaca after the enlargement. 

That followed UK-listed Harbour Energy’s acquisition of Wintershall Dea’s asset portfolio, including assets in the UK, which was completed in September. 

Shell trims offshore wind strategy

Running parallel, Shell has announced that it will scale back on offshore wind development.

“We will be focusing on maximising the value of our existing renewable generation platforms. While we will not lead new offshore wind developments, we remain interested in offtakes where commercial terms are acceptable and are cautiously open to equity positions, if there is a compelling investment case,” a spokesperson said. 

The company will also set up two businesses in power. These will be Shell Power for power generation assets and Shell Energy for B2B retail, customer solutions, marketing and trading.

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“We believe that selective investments in renewable power generation and storage systems, combined with our deep power trading and B2B sales expertise, will enable us to create more value with less emissions," the spokesperson said.

"In selected markets, we see increasing value in using batteries and flexible gas-fired power plants to manage intermittency and help us to meet our customers’ needs as renewables play increasing roles in power markets.”

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Shell currently has around 3.4 GW of renewable capacity in operation around the world.

Meanwhile, the offshore wind sector has been hit hard by rising costs and supply chain issues in recent years which in some cases have led to investors withdrawing from projects. - AW

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