Shell and Equinor: Safeguarding Energy Supply

Shell UK and Equinor's creation of a joint venture came as a surprise to many, but reflects the pressing need to safeguard energy supply. 

Their collaboration also highlights the ongoing importance of oil and gas in meeting energy demands and addressing geopolitical vulnerabilities.

A strategic response to energy security challenges

Shell and Equinor's new company aims to bolster the UK’s energy supply resilience and will become the UK North Sea’s largest independent producer.

The venture, owned equally by the two companies, is designed to sustain domestic oil and gas production while ensuring the security of energy supply. Based in Aberdeen, it will oversee a combined portfolio that includes key fields such as Mariner, Buzzard, Shearwater, and Penguins, among others.

In a statement, Shell highlighted the venture’s role in supporting the UK’s energy transition: “The incorporated joint venture (IJV) will be set up to sustain domestic oil and gas production and security of energy supply in the UK.

“The new company will invest to provide a long-term sustainable future for individual oil and gas fields and platforms, helping extend the life of this crucial sector for the benefit of the UK.”

Zoë Yujnovich, Shell plc’s Integrated Gas and Upstream Director, reinforced the significance of the move: “The new venture will help play a critical role in a balanced energy transition, providing the heat for millions of UK homes, the power for industry and the secure supply of fuels people rely on.”

With global energy markets still recovering from disruptions such as the Russian invasion of Ukraine, ensuring access to domestically-produced resources remains a key priority.

Balancing renewables and fossil fuels

While the transition to renewable energy is imperative, both Shell and Equinor acknowledge that oil and gas remain critical to the UK’s energy system.

Zoe continued: “Domestically produced oil and gas is expected to have a significant role to play in the future of the UK’s energy system.”

Anders Opedal, President and CEO at Equinor, also addressed the necessity of utilising the UK’s remaining North Sea reserves: “The UK basin is maturing and production naturally declining, but the combination of portfolios and expertise will allow continued economic recovery of this vital UK resource. 

The focus of the joint venture is on efficiency and investment to extract resources sustainably while maintaining competitiveness.

Shell added: “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.”

Despite these efforts, the energy produced by the venture will continue to play a supplementary role as renewable technologies expand.

Equinor, for example, retains its offshore wind portfolio, including projects like Dogger Bank and Hywind Scotland, alongside its hydrogen and carbon capture developments.

Joint assets and production goals

On formation, the joint venture will manage more than 140,000 barrels of oil equivalent per day by 2025. In the UK, Shell currently produces more than 100,000 barrels daily, while Equinor contributes 38,000.

By pooling resources, the venture aims to stabilise production and potentially increase output through operational efficiencies.

The venture will include Equinor’s stakes in Mariner, Rosebank and Buzzard, as well as Shell’s equity interests in fields such as Jackdaw, Nelson and Schiehallion.

Each company will retain specific assets outside the partnership. Equinor will keep its cross-border and renewable energy projects, while Shell retains interests in facilities like the St Fergus Gas Terminal and Scotland’s Acorn carbon capture initiative.

Philippe Mathieu, EVP for Exploration and Production International at Equinor, highlights the strategic nature of the collaboration: “This transaction strengthens Equinor’s near-term cash flow and, by combining Equinor and Shell’s long-standing expertise and competitive assets, this new entity will play a crucial role in securing the UK’s energy supply.”

Opedal noted that the joint company is poised for substantial investments in the coming years, not only to mitigate declining production but also to support the broader UK economy.

He addressed concerns about employee integration, promising that the transition would prioritise their interests: “We believe this is the best way to ensure long-term sustainability of the business."

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