Shell Sells Danish Upstream for $1.9bn (Update)
(Updates with comments on divestment, pre-emption)
Anglo-Dutch major Shell is selling its declining upstream Danish business Shell Olie-og Gasudvinding Danmark (Sogu) to Norwegian Energy Company (Noreco) for $1.9bn, it said October 17.
Sogu is a wholly-owned Shell subsidiary that holds a 36.8% non-operating interest in the Danish Underground Consortium (DUC); and, through its subsidiary Sogu Pipelines, a 41.4% stake in the Tyra-E3 pipeline, which connects the Dutch and Danish offshore systems.
The sale is subject to regulatory approval and expected to be completed in 2019, and the price paid will reflect any material over or under production compared with what is expected. The transaction’s effective date is 1 January 2017. Other stakeholders in DUC will be French Total and Danish Nordsofonden once a recent sale by Chevron of its DUC stake is finalised. Shell told NGW that the DUC partners have pre-emption rights but did not give the timeline for exercising them.
Shell’s upstream director Andy Brown said the sale was consistent with Shell's strategy to simplify its portfolio through a $30bn divestment programme "and contributes to our goal of reshaping the company into a world class investment case.’’ The company has already met its divestment goal set for end-2018, which it announced when it bought BG.
Noreco will assume all of Shell’s existing commitments and obligations, including the Tyra redevelopment and the decommissioning costs associated with the assets.
The sale represents production of some 67,000 boe/d net to Shell in 2017. Under the agreement, Shell Trading and Supply and Shell Energy Europe will continue to have oil and gas lifting rights from the Sogu assets for a period after completion. Local Sogu staff primarily dedicated to DUC will continue to be employed by their current entity, which will be owned by Noreco at completion.
“We are very proud and grateful to have been part of the Danish Underground Consortium since its inception five decades ago’’ said Shell’s Country Chair, Lee Hodder. "The DUC continues to provide material tax revenues, jobs and energy security to Denmark, and the Tyra redevelopment will ensure that this will be the case for decades to come. I would like to pay tribute to the staff, stakeholders, partners and authorities who have contributed.’’
The transaction has no direct impact on Shell’s other businesses in Denmark, such as its Fredericia refinery and its petrol stations. Shell will continue to evaluate options to grow new business in Denmark if relevant opportunities present themselves, it said.
Update Nov.30: Noreco said in a stock market filing that none of the relevant DUC partners - in this case Total and Danish state Nordsofonden - had invoked their pre-emption rights to purchase Shell's stake.