September 28, 2023 [Reuters]- Britain has given the go-ahead for one of its biggest new oil and gas projects in years, Equinor’s (EQNR.OL) North Sea Rosebank field, saying energy security was the priority despite opposition from environmentalists.
Wednesday’s announcement comes after Prime Minister Rishi Sunak watered down interim plans for the government’s 2050 net zero emissions target, a move that critics said could also encourage other countries to rein in their climate ambitions.
Energy Security Minister Claire Coutinho said Rosebank would be less emissions-intensive than older oil and gas developments.
“We will continue to back the UK’s oil and gas industry to underpin our energy security, grow our economy and help us deliver the transition to cheaper, cleaner energy,” she said.
The cornerstone of the plan to make Rosebank less emissions-intensive is to electrify the extraction process.
Norwegian energy group Equinor said the earliest the field, located west of the Shetland Islands and due to start output in 2026/27, would be electrified is 2030.
Environmental campaigners had urged the government to halt development of Rosebank, saying it contravened the plan for a net-zero economy.
But Sunak threw his weight behind the North Sea in July, saying Britain needed new domestic fossil fuels to improve energy security and that oil and gas would still feature in the country’s energy mix even by 2050.
The Rosebank field, relatively small in the global context, is expected to produce 300 million barrels of oil in its lifetime.
Green Party lawmaker Caroline Lucas said that “giving the green light to this huge new oil field is morally obscene. This government must be held accountable.”
The main opposition Labour Party, which wants to focus on clean energy, has said it will respect any licences granted before the next election, including for Rosebank.
Uplift, a campaign group, said Britain would struggle to benefit from Rosebank as most of the oil would be processed abroad.
“By approving Rosebank, Rishi Sunak has confirmed he couldn’t care less about climate change,” Uplift’s Tessa Khan said.
Equinor said the type of light, sweet oil contained in Rosebank can be used in most refineries, including in Britain, and that the country can obtain the crude via the open market.
Oil and gas output from Britain’s North Sea has shrunk by two-thirds in the past 20 years, but the industry is still a big contributor to the economy, supporting 200,000 jobs and expected to provide 50 billion pounds in tax revenues over the next five years, according to the government.
Equinor, which holds a majority stake in Rosebank will invest $3.8 billion alongside its partner Ithaca Energy (ITH.L) to develop the first phase of the field.
It expects to spend around $9.8 billion over the lifetime of the field through 2051, including operations and decommissioning, with the bulk going to British firms.
Ithaca Energy’s shares were up 8% in early trading. Equinor’s were up 1.1%.
The North Sea Transition Authority, the UK regulator, said it had taken Rosebank’s emissions into account in relation to Britain’s climate plan.
The development approval follows warnings from many North Sea producers, including Ithaca and Equinor, that a windfall tax the British government imposed on the industry in the wake of the 2022 energy price shock would deter investment in the basin.
The windfall tax includes an investment incentive that means oil and gas firms can offset from their tax bill around 91 pounds in every 100 pounds spent on new production.
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