Equinor, Shell form JV aimed at maximizing UKCS assets, improving UK energy security outlook

Equinor ASA and Shell plc will combine UK offshore oil and gas assets of Equinor UK Ltd. and Shell UK Ltd. into a new, Aberdeen-based company expected to be the UK North Sea’s biggest independent producer. 

The 50-50 upstream joint venture, expected to produce over 140,000 boe/d in 2025—Equinor currently produces about 38,0000 boe/d while Shell produces over 100,000 boe/d (2/3 liquids, 1/3 gas)—aims to maximize the value of the combined UK Continental Shelf assets as the area naturally declines and improve the UK's energy security outlook, the companies said in a joint statement Dec. 5.

Equinor will contribute its equity interests in Mariner, Rosebank, and Buzzard. The company will retain ownership of its cross-border assets, Utgard, Barnacle, and Statfjord, as well as its offshore wind portfolio. It also will retain the area’s hydrogen, carbon capture and storage (CCS), power generation, battery storage, and gas storage assets.

Shell will add its equity interests in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion. It will retain ownership of its interests in the Fife NGL plant, St Fergus Gas Terminal, and floating wind projects under development. It also will also remain Technical Developer of Acorn, Scotland’s largest CCS project.

A “range of exploration licenses” are also to be contributed to the new JV, the companies said.

Rosebank project risk

In a deal note Dec. 5, TD Cowen analysts said closing of the deal, which is expected by end-2025 subject to certain approvals, "accomplishes [Equinor’s] goal of farming down Rosebank with project risk moved to JV. The JV expects to distribute cash from year 1 while distributions should grow once Rosebank is online." 

Equinor holds an 80% interest in the 77,000 boe/d Rosebank project under development. The field lies around 130 km northwest of the Shetland Islands in about 1,100 m of water. Total recoverable resources (to be developed in two phases) are estimated at 300 million bbl of oil, with Phase 1 targeting an estimated 245 million bbl of oil, Equinor said in September 2023 upon taking final investment decision to advance the project (OGJ Online, Sept. 27, 2023).

Equinor "had assumed it would spend $1.2B on the project from 2025-27 after already accounting for a 50% farmdown,” TD Cowen said in its research note. With the JV, that investment, the deal “will move that $1.2B spend into the JV and accomplish its farmdown goal while also warehousing risk to further project delays in the JV."