Market uncertainty and windfall profit taxes pressure UK upstream oil and gas independents to consolidate and rethink their portfolios as North Sea’s clean energy future begins to take shape
Consolidation over the last 18 months is reshaping the UK offshore oil and gas market as regulatory and market uncertainty and windfall profit taxes drive energy developers to reconsider their investment plans and portfolios in the region.
One of the latest mergers involves a new joint venture company that will be owned by Repsol E&P Group (45%) and privately held NEO UK (55%) which would create a leading independent oil and gas producer on the UK Continental Shelf. The combined venture, NEO Next Energy, will be a diversified UK North Sea-focused oil and gas company, with a projected 2025 production of approximately 130,000 barrels of oil equivalent per day (/d). Financial benefits from the merger are expected to be more than US$1Bn, with improved cash generation and better shareholder returns, according to Repsol. Subject to regulatory approvals, the transaction would close in Q3 2025.
Repsol will retain US$1.8Bn of the decommissioning liabilities related to its legacy assets.
NEO NEXT will have “more scale and diversity and opportunities for cost consolidation and portfolio high-grading giving resilience despite the tough conditions in the UK,” commented NEO Energy chair, John Knight.
Based in Aberdeen, Repsol UK notes on its website it has interests in 43 fields on the UK Continental Shelf, with 11 offshore installations and two onshore terminals.
NEO UK has interests in 25 North Sea assets.
“Windfall tax has reduced investment appetite”
This latest agreement follows in the wake of five major M&A deals announced in 2024, the most auspicious of which was the proposed marriage that would combine the UK oil and gas assets of Shell UK and Equinor UK into the region’s largest independent oil producer. Equinor’s equity interests in Mariner, Rosebank and Buzzard, and Shell’s equity interests in Shearwater, Penguins, Gannet, Nelson, Pierce, Jackdaw, Victory, Clair and Schiehallion will be rolled into the 50-50 joint venture. Both parties will retain ownership of their gas, offshore wind and carbon capture, utilisation and storage (CCUS) projects.
