I really enjoy the holiday season. A lot of time is spent with family and friends, with festive music in the air as well. I hope those who celebrate will soon enjoy a well-deserved break.
In the meantime, let’s get into two pieces of energy news from last week.
Shangyou Nie
Editor, Well Read
Shell and Equinor Combine Forces in U.K. Offshore
James Jones Jr./ Shutterstock.com
Shell and Equinor announced they will combine assets in the United Kingdom’s North Sea. These assets have the potential to produce 140,000 barrels of oil per day in 2025 and 200,000 by 2030. The deal is the latest example of companies pooling their holdings in the aging U.K. offshore to leverage investment, people, and tax positions.
The new entity:
The incorporated joint venture will be based in Aberdeen, Scotland. Shell and Equinor will each own 50 percent of the new company.
Equinor’s equity in the Mariner, Rosebank, and Buzzard fields, and Shell’s equity interest in the Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair, and Schiehallion fields will be pooled together.
Some exploration licenses will also be owned by the new company.
There has been no mention of which side would pay the other to form the 50:50 IJV.
Deal closure is expected before the end of 2025.
The IJV will become the United Kingdom’s largest independent producer, with the potential to grow production to 200,000 barrels of oil equivalent per day within five years.
Assets not included in the deal:
Equinor will retain its cross-border assets, including Utgard, Barnacle, and Statfjord, as well as its offshore wind portfolio. Equinor will retain its hydrogen, CCS, power, battery and gas storage business.
Shell will hold onto its Fife NGL plant, a gas terminal, and CCS and offshore wind projects currently being developed.
By the numbers:
Shell U.K. produces about 100,000 barrels of oil equivalent per day.
Equinor produces about 38,000 barrels of oil equivalent per day in the United Kingdom.
Shell employs about 1,000 oil and gas roles in the United Kingdom, and Equinor employs about 300.
Equinor has roughly $7.6 billion in deferred tax losses from its U.K. operations. Shell’s tax losses are significantly smaller due to higher production.
The new entity will allow U.K. projects to attract more capital, rather than having to compete with each major’s global portfolio, according to a Shell representative.
What they’re saying: “This transaction strengthens Equinor’s near-term cash flow … This new entity will play a crucial role in securing the United Kingdom’s energy supply,” says Philippe Mathieu, EVP of E&P International, Equinor
Emerging trend:
Similar joint ventures were previously formed in the mature North Sea to reduce costs and prolong the economic life of fields.
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ADNOC recently announced it has set up a low-carbon energy, gas, and chemical investment vehicle XRG with a more than $80-billion-deep pocket. In the long run, XRG will invest in three areas, transformation of energy, exponential growth in AI, and the rise of emerging economies.
About XRG:
XRG will serve as ADNOC’s vehicle to accelerate its global expansion, “building on proven expertise, a robust network of global partners, and strategic market access.”
XRG hopes to double its asset value within 10 years.
XRG will commence activities in Q1 2025, with a planned “global strategy day” sometime in 2025.
With XRG’s planned investments, ADNOC will become a fully integrated energy company.
XRG’s investment plan:
ADNOC describes XRG’s strategy as meeting “rising global demand for lower-carbon energy and chemicals required to power sustainable economic growth.”
For its Global Chemicals platform, XRG aims to become one of the top five global chemicals players, meeting a projected 70-percent increase by 2050.
For its International Gas platform, XRG will build a world-scale integrated gas portfolio to help meet the anticipated 15-percent rise in global gas demand over the next decade, as well as the predicted 65-percent increase for LNG by 2050.
For its Low Carbon Energies platform, XRG will invest in low-carbon energies and decarbonization technologies, such as low-carbon ammonia, which is projected to grow 70–90 million tonnes annually by 2040.
What they’re saying: ADNOC is “following Saudi Aramco by internationalizing downstream,” Martin Sherriff, leader of Middle East and North Africa upstream research at Welligence Energy Analytics, told Upstream.
There may also be more investment in chemicals across the industry and the United States, with one example being the acquisition of German chemical company Covestro for $16 billion in October.
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