Business

Britain to Allow Big North Sea Oil Field, Despite Climate Concerns

The British government on Wednesday gave a go-ahead to develop a large offshore oil field known as Rosebank, a move that is expected to provide a modest boost to the country’s oil and gas industry but prompted outrage from environmental groups.

Equinor, the Norwegian state-controlled energy giant that owns 80 percent of Rosebank, said the project would generate 8.1 billion pounds, or about $9.4 billion, in direct investment and support around 1,600 jobs in the construction phase with 450 continuing for around 20 years after oil production begins around 2027.

The oil and gas industry in Britain, which employs about 130,000 people, has faced an uncertain future because of declining production and recent tax increases on oil company profits.

“I think it is quite important to the U.K. in terms of economic benefits,” said James Reid, a senior research analyst at Wood Mackenzie, an energy consulting firm.

Environmental groups, however, were dismayed by the decision.

“This is yet another colossal failure of leadership from a government that seems determined to ignore the scientific warnings on the climate crisis,” Friends of the Earth said in a statement.

Rosebank is a very large, undeveloped field in the British North Sea, with an estimated 300 million barrels of recoverable oil. Discovered almost two decades ago, it has long been on the shelf because of prohibitively high projected costs tied to its location in the far northern part of the North Sea, about 80 miles northwest of the Shetland Islands.

A new, cheaper approach led by Equinor has changed the calculations. “We believe it is very attractive, economically,” said Gilad Myerson, executive chairman of Ithaca Energy, an Israeli-controlled, London-based company that owns the remaining 20 percent stake in Rosebank.

But there is heated debate in Britain about whether new oil and natural gas projects in the North Sea should be permitted at all, given the country’s ambitions to achieve net zero emissions by 2050. Environmental groups have turned what had been a routine process of reviewing applications for new offshore drilling into tests of the government’s commitment to cut greenhouse gas emissions.

At present, the Conservative government of Prime Minister Rishi Sunak is choosing to allow some new petroleum investment, figuring that it is preferable for both environmental and energy security reasons to produce oil and gas in domestic waters than import it from elsewhere.

“It makes sense to use our own supplies from North Sea fields such as Rosebank,” said the energy security secretary, Claire Coutinho, adding that “the jobs and billions of pounds this is worth to our economy will enable us to have greater energy independence, making us more secure against tyrants like Putin,” referring to the Russian president, Vladimir V. Putin.

The move follows the decision last week by Mr. Sunak to delay by five years a ban on the sale of gas and diesel cars, to 2035 from 2030, and lower targets for replacing gas boilers.

In a statement on Wednesday, the North Sea Transition Authority, which regulates British oil and gas, said that it in approving Rosebank, it had taken “net zero considerations into account.”

The uncertainty hanging over the industry in Britain is unlikely to dissipate. The opposition Labour party says it will halt approval of new oil and gas projects if it wins the next general election, which is expected to be held next year, although it is not threatening to reverse existing approvals.

Still, there is a possibility that Rosebank will open up more of the northern North Sea for future developments, said Mr. Reid, the energy analyst.

Rosebank has long been a promising development thwarted by high costs. The location is in deep water — 3,600 feet below the surface — and has difficult geology. There are also frequent spells of storms and other bad weather in the area.Chevron spent years and substantial sums trying to work out how to bring the oil to market before shelving the plan in 2013 and selling its 40 percent stake to Equinor in 2018.

Equinor will produce the oil using a floating storage vessel that was used on a field in Norway and is now being modified in Dubai, cutting costs. Reusing the vessel, which is smaller than originally conceived, is “a much cheaper option,” said Mr. Myerson, of Ithaca Energy.

Stephen Castle contributed reporting

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