The real prize of this tie-up is the attraction of a bigger company to possible buyers
Conditions for oil and gas companies in the UK North Sea over the past 18 months have become as hostile and unpredictable as the weather off Scotland’s north-east coast. It was already a mature basin with declining production and relatively high costs, but the introduction from May 2022 of the UK’s “energy profits levy” — a “windfall” tax that has since been raised and extended several times — has made operating in the region harder than ever.
Adding Shell’s UK production means the new joint company would produce about 140,000 boe per day in 2025, allowing it to make use of those tax losses much earlier and more efficiently. Second, the combined company will have a more attractive production timeline. Shell has more near-term production. But Equinor’s $3.8bn Rosebank scheme 80 miles north-west of the Shetlands — if allowed to proceed — would contribute production up to 2050.
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