Equinor and Shell's decision to combine their North Sea oil and gas assets into a new company shows that the basin is "still attractive for some companies" despite the windfall tax.
Analysts at Wood Mackenzie say the mega-deal will create the biggest producer on the UKCS and "demonstrates the long-term attractiveness of the region.”
When the deal is signed off, Equinor UK will control 50% of the new firm and Shell UK will hold the remaining 50% stake - creating what will be the UK's largest independent producer employing 1,300 people.
The company will be based in Aberdeen and will be set up to sustain domestic oil and gas production and the security of energy supply in Britain.
According to Wood Mackenzie analysis, the new venture will deliver production of nearly 150 kboe/d in 2025, well ahead of the second largest, Harbour Energy, at 130 kboe/d.
It will also drive 2030 production to 220 kboe/d, eclipsing the second largest producer in 2030, Ithaca Energy, by over 100 kboe/d.
Gail Anderson, research director at Wood Mackenzie said: “This creates a new UK superpower.
“West of Shetland is a key growth area for the IJV, 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.”
Ms Anderson noted that Equinor brings a sizeable tax loss position into the IJV, which combined with Shell's portfolio will realise additional value.
“The deal has come following a time of unprecedented fiscal volatility in the UK with multiple changes to the Energy Profits Levy since 2022,” she added.
“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.”