New North Sea investment optimism: Total acquires Maersk Oil paving the way for further investments in the North Sea


Total acquires Maersk Oil

On 21 August 2017 A.P. Møller - Mærsk A/S (APMM) entered into an agreement to sell Mærsk Olie og Gas A/S (Maersk Oil) to the French energy company - Total S.A. (Total), the world's fourth-largest oil and gas company. The Boards of Total and APMM have approved the acquisition of 100 percent of the equity of Maersk Oil for US$ 7.45 billion (DKK 47 billion) in a combined share and debt transaction. Total will take over Maersk Oil's entire organization, portfolio, rights and obligations. The agreement is subject to regulatory approval from the relevant authorities. According to the companies' press release, planned development schedules and strategic investments will be upheld. With Maersk Oil's large involvement in the Danish parts of the North Sea, Total is now likely to become the new player in the area.

Background: Maersk and Danish Underground Consortium in the North Sea

Danish Underground Consortium (DUC) was established in 1962, when A.P. Møller (now APMM) was awarded the sole oil concession. Today, DUC is a joint venture between APMM (31.2 percent), Shell (36.8 percent), Chevron (12 percent) and the North Sea Fund (20 percent). The North Sea Fund is an active state-owned partner who joined DUC in 2012. The DUC parties cooperate to recover oil from the Danish fields in the North Sea, an area which covers 1,635.7 km² of the Danish continental shelf. Maersk Oil is the largest oil operator in Denmark and its biggest partnership is with the DUC.

Renewed optimism for investments in the Danish North Sea fields

According to the press release by Total, it is the aim to maintain Maersk Oil's strong position in the North Sea. Furthermore, it is the intention that Copenhagen will become Total's Nordic hub for operations in Denmark, Norway and the Netherlands. The North Sea area is not a new area to Total, which is already present in the North Sea area of Norway and the United Kingdom. However, with Total's acquisition of Maersk Oil, Total now enters the Danish fields in the North Sea. Other new players, not least international equity funds, may follow.

Promoting investments in the Danish fields in the North Sea remains a central priority to the Danish government, a priority which is also supported by concrete legal initiatives. Earlier this year, Maersk Oil worked with the Danish Government on behalf of the DUC to find an economically viable solution for the redevelopment of the Tyra field in the North Sea. In March 2017, the Danish government announced an agreement with the DUC, whereby the Danish government agreed to reduce the tax on oil and gas production from 2017-2025. The purpose of this agreement was to ensure the continued development and the full reconstruction of the Tyra field. The new tax agreement is likely to pave the way for further investments.