Norway’s Equinor is close to sealing a deal to acquire Suncor Energy’s oil and gas assets in the British North Sea for around $1 billion. Three anonymous sources familiar with the matter disclosed the news on Wednesday. The deal includes Suncor’s 40% stake in the Equinor-operated offshore Rosebank oil and gas project, one of the biggest developments in the area. It is located about 130 km northwest of the Shetland Islands.
Equinor and Suncor have refused to comment on the reports. The sources asked to remain anonymous as discussions are confidential. If successful, the acquisition would grant Equinor a significant tax credit, which it can use to offset future investments in the basin, according to insiders.
Equinor’s interest in the North Sea
The acquisition of Suncor’s assets will offer Equinor an opportunity to increase its investment in the North Sea, where it has already made a considerable commitment. Equinor and its partners probably will make a final investment decision on Rosebank’s development later this year. Equinor has a 40% stake in the project, which was previously estimated to cost around £4.3 billion ($5.22 billion). The remaining 20% of the Rosebank development is held by London-listed Ithaca Energy.
Equinor’s acquisition of Suncor’s interest in the Rosebank development could lead to consolidation in the area. Equinor is looking for ways to maximize the productivity of its North Sea assets while lowering costs. Acquiring the remaining interest in the project could help to achieve both of these objectives.
Suncor’s plans to divest Its upstream assets
Suncor had indicated its desire to divest its upstream assets in the UK since last August. Its focus is on its core oil sand operations in northeast Alberta. Last year, the Canadian firm sold its upstream assets in Norway for over $400 million to private equity-backed Norwegian oil and gas firm Sval Energy.
The transaction also includes Suncor’s 29.9% stake in the Buzzard oilfield. It is the largest supplier to Forties, one of the North Sea crude oil grades that underpin the Brent crude benchmark. The Buzzard oilfield delivers more than 20,000 barrels of oil equivalent net to Suncor, according to the company’s website.
British windfall tax is not beneficial to Equinor
The acquisition comes after the UK government’s decision to increase the windfall tax. They raised the tax on North Sea oil and gas producers to 35% from 25%. This change brings the total tax rate to 75%, one of the highest in the world. The tax increase led many companies, including Equinor, to warn that they might reduce their UK North Sea investments.
Equinor’s potential acquisition of Suncor’s oil and gas assets in the UK North Sea would give the Norwegian company an opportunity to consolidate its operations in the area. It would also grant it a significant tax credit, which it could use to offset future investments in the basin. The deal would aid Suncor’s strategy of focusing on its core oil sand operations in northeast Alberta.