Shell Joins Domestic UK Retailers

Shell announced December 21 it has agreed to acquire a UK energy retailer, its first move to directly supply gas and power to households in Britain. 

It already sells both commodities to industry, and this purchase – for an undisclosed sum – of First Utility allows it to capture more of the downstream value from its gas while also introducing more efficient, lower carbon energy use for households and transport.

Downstream, Shell has agreed to buy 100% of First Utility, a leading UK household energy and broadband provider serving 825,000 homes, subject to regulatory approvals. Shell said its supply, trading and marketing expertise would enable First Utility to develop more innovative services. 

A Shell spokesperson confirmed: "Although we have provided indirectly through wholesale supply previously, this is our first move into direct supply of [UK] households." Shell told NGW that it expects First Utility to continue contracting gas at market prices for its customers until the deal is completed, likely early next year; but thereafter it might act as a funnel for some of Shell's equity gas.  

Shell’s executive vice president of New Energies Mark Gainsborough said: “This combination will enable Shell to enter a new part of the energy market in the UK and to improve choice for customers by delivering innovative services at competitive prices.” 

First Utility has a 3% share of the UK residential energy market, so is not among the 'Big Six' established retailers, which could become the Big Five if the planned merger between SSE and RWE goes ahead. 

Shell Energy Europe, the European gas and power marketing and trading business, will continue to supply wholesale gas and electricity to energy retailers in the UK and Europe, including First Utility. In 2015, a licensing agreement between Shell Brands International and First Utility enabled them to operate in the German household energy sector under the Shell brand.  

First Utility co-founder and CFO Darren Braham said: "Shell has been our strategic trading partner for a number of years and we are excited about the extra value and propositions we can deliver to customers as a result of this sale. First Utility has brought significant disruption and competition to the energy market and this move will help us to capitalise on all the opportunities provided by digitalisation, decarbonisation and the move to battery technology and electric vehicles. Shell is the ideal business to acquire us." Its 100%-owned subsidiary in Germany, First Utility GmbH, is also included in the deal.

Tailwind buys into Dana field

Separately, North Sea start-up company Tailwind Energy has bought out Shell and ExxonMobil's stakes from the Dana Petroleum-operated Triton field cluster in the UK North Sea. Tailwind is reported to have bought Shell's 26.42% and Exxon's 20% interests; no price was disclosed. 

Triton floating production ship (FPSO) on block 21/30, some 120 miles east of Aberdeen, produces oil and gas from the Bittern, Clapham, Pict, Saxon, Guillemot West and North West fields.

Shell confirmed it has sold its interests in the Triton Cluster in the central North Sea to Tailwind, subject to regulatory and partner approval and is expected to complete in the first half of 2018. It said: "No staff will transfer as part of the transaction. This deal is consistent with our strategy to reshape Shell into a world class investment case."

Shell announced November 1 it had completed its up-to-$3.8bn divestment of UK, mostly ex-BG gas producing, assets to private equity-backed independent Chrysaor as first announced January 31.

Update December 22:

Tailwind Energy sent its statement late December 21 to NGW saying it has signed an agreement with Shell and ExxonMobil to acquire their interests in the Triton Cluster, which Tailwind intends to further develop. It said that the Triton Cluster was initially brought into production in 2000. "The deal is subject to regulatory and partner approvals and is expected to complete in the first half of 2018. No staff will be transferred as part of the transaction." it noted. Tailwind is investing in the UK offshore and being supported by Mercuria, it added, which "will provide Tailwind with a fully integrated capital and crude oil marketing solution; Tailwind has an agreement with Petrofac to provide transition, operations and project execution services in support of its activities." Value of the deals was not disclosed.