TotalEnergies Advances Major North Sea Oil and Gas Merger

TotalEnergies consolidates some of the major oil and gas resources of the North Sea, enhancing its capacity to produce despite an increase in consolidation in the basin.

TotalEnergies has announced a big rearrangement of its oil and gas portfolio in the British North Sea by consolidating assets and, in a move with Spain's Repsol and HitecVision, forming a joint venture. The bid signifies an increasing rate of consolidation in the region, after other recent transactions between Shell, Equinor, and Ithaca Energy.

According to the agreement, TotalEnergies is to have 47.5 percent, Repsol 23.625 percent, and HitecVision 28.875 percent of the merged entity now named NEO NEXT and shortly to be renamed NEO NEXT+. The upsized oil and gas unit is expected to yield over 250,000 barrels of oil equivalent on a daily basis by 2026, and this will be more than Shell and Equinor's Adura initiative. The merger involved some of the key oil and gas fields, such as Elgin/Franklin, Penguins, Mariner, Shearwater, Culzean, Alwyn North, and Dunbar.

To some extent, the deal is motivated by the windfall tax implemented in the UK following the energy price spike in 2022. The cumulative tax on companies is now 78 percent, and therefore companies are increasingly utilizing mergers to make up their losses and to actually avoid the liabilities, a strategy that analysts believe is likely to decrease the amount of tax revenue that the British government will face in the future.

TotalEnergies indicated that the deal would be completed within the first half of 2026, subject to regulatory clearance. The tie-up represents another similar merger between Repsol and NEO Energy nine months later, which supports the consolidation trend with strategic consolidation reshaping the oil and gas industry in the aging North Sea basin.