The name is Rosebank. It sounds innocent enough, but could prove to be one of the thorniest environmental dilemmas for the new U.K. government.
Some 80 miles south-west of Shetland, one of the most unspoilt parts of the British Isles, Rosebank is believed to contain up to 300 barrels of oil and gas. By 2030 it is expected to produce almost 8% of U.K. oil production, amounting to £25bn of British UK GDP over its likely 25-year lifetime. Its owners are the Norwegian energy company Equinor and the U.K.’s Ithaca Energy. Equinor is the leading operator on the Norwegian continental shelf.
The previous Conservative government gave the go-ahead for a round of new exploration licences in 2023 and earlier this year, despite strong opposition from over 50 British Members of Parliament from all parties, Greenpeace and the green energy transition organisation Uplift. MPs argued Rosebank would produce 200m tonnes of carbon dioxide, more than the combined annual CO2 emissions of all 28 low-income countries globally.
A Conundrum
New Prime Minister Keir Starmer has pledged not to revoke any of these licenses, but Rosebank might be an exception, argues Matteo Ilardo, Europe Analyst at RANE.
“The new Labour government has flagged it will be more ambitious with its climate and green energy policies than the previous Conservative administration,” he said.
Labour has pledged to ban new oil and gas licenses for the North Sea.
Starmer’s government has also decided to continue a levy on profits from the North Sea oil and gas fields first imposed by the Conservatives following the surge in oil prices following the invasion of Ukraine. It has said it will tighten up the rules around investment allowances companies can offset against tax.
However, Anders Pedal, chief executive of Equinor said on July 28 that Labour’s tax proposals will make its plans to electrify extraction operations at Rosebank more challenging. The company intends reduce emissions from its operations by 70% by using renewable electricity to power operations.
Aside from the implications for the the local community, both positive in terms of job creation and negative in the immediate environmental effect, the new government faces a challenge in balancing the tax, energy and economic advantages of the proposed project with its commitment to limiting global warming.
The argument against is stark. Carbon dioxide (CO2) emissions from the combustion of fossil fuels is the main driver of global and the resulting climate change. A Grantham Research paper for the London Business School argues that to keep global warming below 2 per cent, 33% of the oil reserves, 49% of the gas reserves and 82% of the coal reserves identified by 2015 (the year the estimation was made) would need to remain unburned up to 2050, even allowing for carbon capture, usage and storage technologies.
Dwindling U.K. Oil Production
The U.K.’s offshore oil and gas industry is well past its heyday. North Sea oil and gas production peaked about 20 years ago and. Last year, the Conservative government estimated that only 65% of active oil fields would still be in production by 2030. In other words, Rosebank would provide a welcome boost to declining oil revenues.
The independent advisory Climate Change Committee has said that while ending North Sea exploration would signal the U.K.’s commitment to the 1.5% temperature increase target, the country’s reliance on imported oil and gas for the immediate future means that it could actually be more environmentally advantageous to stop importing as much oil and generate more at home.
However, the committee concluded that while the U.K. will continue to need some oil and gas till it reaches net zero, this would ‘not in itself justify the development of new North Sea fields.’
Falling oil and gas prices as a result of decarbonisation will also reduce the monetary gain from marginal increases in gas and oil production – but not to the extent that operating a major oil field such as Rosebank would not be profitable.
