Shell Halts Investments in New Offshore Wind Projects, Partners with Equinor to Create ‘UK’s Largest Independent Oil & Gas Company’

December 5, 2024, by Adrijana Buljan

Shell has decided to cease investments in new offshore wind developments as part of a review of the Shell Energy business. The oil and gas major, which has built a significant portfolio of renewable energy and clean fuel projects, will not abandon its existing offshore wind projects, but investing in new offshore wind farms is (currently) off the table.

As first reported by Reuters on 4 December and confirmed to offshoreWIND.biz by the company on 5 December, the decision is part of a Shell Energy power strategy refresh and a company-wide review that started last year.

“We will be focusing on maximising the value of our existing renewable generation platforms. While we will not lead new offshore wind developments, we remain interested in offtakes where commercial terms are acceptable and are cautiously open to equity positions, if there is a compelling investment case”, a Shell spokesperson said in an email statement.

The new strategy for Shell Energy will also result in it being split into two separate business units, with Shell Power focusing on power generation assets and Shell Energy doing business in B2B retail, customer solutions, marketing and trading.

On the business change, the Shell spokesperson highlighted that while the new units will be separate, they will be run as connected businesses and work closely together. This is all aimed at improving accountability and delivery, and is in line with the simplification drive at Shell, according to the spokesperson.

“We believe that selective investments in renewable power generation and storage systems, combined with our deep power trading and B2B sales expertise, will enable us to create more value with less emissions. In selected markets, we see increasing value in using batteries and flexible gas-fired power plants to manage intermittency and help us to meet our customers’ needs as renewables play increasing roles in power markets”, Shell’s spokesperson said.

In separate news today, 5 December, the UK-based Shell announced the company was setting up an incorporated joint venture (IJV) with Norwegian global energy player Equinor in the UK, which the partners say will be “the UK North Sea’s biggest independent producer” of oil and gas.

View on Offshore-energy.

As part of the agreement for the new IJV in the UK, Equinor will retain ownership of its offshore wind portfolio, including Sheringham Shoal, Dudgeon, Hywind Scotland, and Dogger Bank offshore wind farms and Shell will keep its ownership interests in the floating wind projects under development, MarramWind and CampionWind.

In addition to the two UK projects under development, Shell currently has several offshore wind farms in development, construction and operation worldwide, and around 3.4 GW of capacity in operation across different renewable energy projects around the world. Among its newer offshore wind projects is the Hollandse Kust West VI offshore wind farm in the Netherlands, which the company owns together with Eneco and Chubu Electric Power and which is set to conclude multiple nature-inclusive solutions.

Over the past year, the company also exited several offshore wind developments in which it held a stake together with other partners, with those projects mostly being in the planning/permitting stage at the time.

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Shell’s partner in the new oil and gas company in the UK, Equinor, has also been looking to minimise investments in new offshore wind projects after acquiring 9.8 per cent of the shares and votes in Ørsted with plans to increase this to 10 per cent.

In an analyst call following its Q3 2024 results, Equinor’s Chief Financial Officer (CFO) Torgrim Reitan said that through a transaction like this, the company gets “access to offshore wind projects at a much more reasonable price than actually building things from scratch for the time being”. Equinor continues with the three developments underway, Dogger Bank in the UK, Empire Wind in the US and Baltyk in Poland, and beyond these and towards the company’s 2030 objectives, investment in Ørsted “replaces investments that we could do organically”, Reitan said.

Besides Shell and Equinor, another oil and gas major, British BP, is also reportedly reducing its offshore wind involvement. According to reports by Reuters earlier this year, BP is considering the sale of a minority stake in its offshore wind business and has dropped its plan to cut oil production by a quarter by 2030, turning to increasing its output volume.

However, neither of the companies is reported to have plans to exit the offshore wind market as such.