Shell and Equinor’s recently announced combination “creates a new UK superpower”, Wood Mackenzie said in a note sent to Rigzone.
In the note, Wood Mackenzie highlighted that, according to its analysis, the combined business will deliver production of nearly 150,000 barrels of oil equivalent per day in 2025, which Wood Mackenzie pointed out is “well ahead of the second largest, Harbour Energy, at 130,000 barrels of oil equivalent per day”.
The combination will also “drive 2030 production to 220,000 barrels of oil equivalent per day, eclipsing the second largest producer in 2030, Ithaca Energy, by over 100,000 barrels of oil equivalent per day”, according to Wood Mackenzie’s analysis, the company outlined.
“This new venture will create the biggest producer on the UK Continental Shelf and demonstrates the long-term attractiveness of the region,” Gail Anderson, a research director at Wood Mackenzie, said in the note.
“This creates a new UK superpower … West of Shetland is a key growth area for the incorporated joint venture, through the Rosebank, Clair, and Victory fields. There is also the potential for future fields, as both companies acquired exploration acreage West of Shetland in the 33rd licensing round,” Anderson added.
Anderson went on to state that the deal has come “following a time of unprecedented fiscal volatility in the UK with multiple changes to the Energy Profits Levy (EPL) since 2022”.
“A consultation will begin in 2025 on a successor to the EPL post-2030. Despite these ongoing risks, it is clear the UK is still attractive for some companies, and this deal will provide greater certainty for long-term investment on the UKCS,” Anderson continued.
In separate statements published on their respective websites last 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 “will be set up to sustain domestic oil and gas production and security of energy supply in the UK”.
According to a statement posted on UK oil and gas regulator the North Sea Transition Authority’s (NSTA) website back in May, a total of 82 offers to 50 companies have been made in the 33rd oil and gas licensing round.
The round attracted 115 bids from 76 companies across 257 blocks and part-blocks, the NSTA highlighted in the statement, which noted that the North Sea “remains a vibrant home for exploration”.
The EPL was introduced in May 2022 to tax the extraordinary profits of oil and gas companies operating in the UK or the UK Continental Shelf, a policy paper published on the UK government website on October 30 states.
The policy paper notes that the EPL is a temporary levy on profits arising from the upstream production of oil and gas, in addition to the permanent tax regime of Ring Fence Corporation Tax, which is charged at 30 percent, and the Supplementary Charge, which is charged at 10 percent.
A recent measure increased the rate of the EPL by three percentage points to 38 percent, extended the end date of the EPL to March 21, 2030, and removed the EPL’s Investment Allowance, the policy paper outlines, adding that the measure also reduced the rate of the Decarbonization Investment Allowance to 66 percent to maintain its cash value following the EPL rate increase.
“The government will publish a consultation in early 2025 on how the government will respond to price shocks once Energy Profits Levy ends,” the policy paper highlights.
Shell UK has been producing oil and gas from the North Sea for more than 50 years, providing the UK with reliable and secure energy, the company’s website states. Offshore, the company has interests in more than 50 fields, 25 platforms, and one floating production and storage offshore (FPSO) vessel which is operated by a third party on its behalf, the site highlights.
Equinor supplies almost 30 percent of UK demand for natural gas and more than 15 percent of oil, its site states. The company has been operating in the UK for nearly 40 years, “where we have been helping switch over from coal to gas”, Equinor’s site points out.
