Explained | What is the row over UK’s Rosebank oil field?

The story so far: Angering enivronmental activists across United Kingdom (U.K), the British government okayed one of the country’s biggest new oil and gas projects —the North Sea Rosebank field— on September 27. The Rishi Sunak government claims that the project was essential for securing the nation’s energy demands.

The move comes mere days after UK Prime Minister Rishi Sunak announced a delay in the ban on sales of new petrol cars from 2030 to 2035, claiming that he needed the public’s support in switching to net zero (carbon emissions). Mr. Sunak claims that Britain could afford to make slower progress in net zero emissions by 2050 as it was ‘so far ahead of every other country in the world’. The watering down of Britain climate action has triggered fears of other European nations following suit.

Mr. Sunak has stood firm by his decision to green light Rosebank, stating that it was a necessary domestic source of fossil fuel and that Britain would still be dependent on oil and gas as one of its fuel sources by 2050. His Energy Security Minister Claire Coutinho has stated that Rosebank will produce less emissions as it would eventually electrify the oil extraction process.

What is the Rosebank field project?

Located 130 kilometres north-west of Shetland islands, the Rosebank oil field was first discovered in 2004 by Chevron. While oil reserve capacity was demonstrated in 2019, the field has remained untapped till now. In 2019, Norwegian oil company Equinor acquired the licences for the project from Chevron. Known for tackling challenging deepwater untapped reserves, this joint venture by Equinor (80%) and British oil honcho Ithaca (20%) will drill for oil at a depth of 1100 metres under water. The project will be developed in two phases, with the first oil extraction scheduled for 2026.

Estimated to pump 300 million barrels of oil, the Rosebank field will comprise of 8% of UK’s total oil production and is estimated to generate 1,600 jobs during construction and 450 UK-based jobs throughout its lifetime — till 2051. Equinor estimates that the project investment will amount to £8.1 billion, of which £3.1 billion has already been invested in the first phase.

The project will reuse a Floating Production Storage and Offloading vessel (FPSO) previously owned by Altera Infrastructure. An FPSO is a ship-like structure which receives fluids through risers from subsea reservoirs and then separates them into crude oil, natural gas, water and impurities. In order to reduce carbon emissions, the FPSO will be prepared for future electrification, cutting down the upstream carbon dioxide (CO2) intensity from 12kg/boe (barrels of oil equivalent) to less than 3 kg/boe.

The Norwegian oil producer had first submitted its environmental proposal in August 2022, which was open for public consultation till September 2022. While initially questioning Equinor about the environmental impact of the project, the North Sea Transition Authority — UK’s oil and gas regulator— okayed the project after considering the project’s net zero action throughout its lifetime. After Equinor made a final investment decision, the Sunak government okayed the project on September 27, 2023, despite protests by climate activists.

Conservatives, Labour & Scotland: Where do they stand on Rosebank?

Throwing his weight behind Rosebank, Mr. Sunak highlighted how important the North Sea oilfield was for UK’s energy security and economy. In an interview with BBC Scotland, he said, “I don’t want our children to be dependent on foreign dictators like Putin for our energy”.

He added that while UK will switch to clean energy, he would prefer to use gas from domestic sources during the transition rather than “import [gas] from abroad at four times the carbon emissions.” The UK government has stated that if investment in new North Sea oil projects is stopped, the nation’s fuel imports will increase by 10% by 2035.

Surprisingly, the Labour party, which opposes development in the North Sea, has said it will not reverse the approval to develop Rosebank if it wins the general election in 2025. Its leader Mr. Keir Starmer said that the party would accept the projects it inherits from this government to ensure stability, if it comes to power in 2025. His remarks were met by protests by Labour supporters outside shadow cabinet members’ offices.

Pulling up the Sunak government for reversing its net zero policies, Ed Miliband, the shadow Secretary of State for Energy Security said that the Labour party will tackle cost of living crisis and the climate crisis in tandem. Claiming that Conservatives lacked a vision for future economic growth, Mr. Miliband asserted that the only way to bring down household bills and secure UK’s economic future was by switching to green energy.

Criticising Mr. Sunak, Scotland’s first Minister Humza Yousaf claimed that Downing Street was in ‘climate denial.’ Taking to the microblogging site X (formerly Twitter), Mr. Yousaf pointed out that as Equinor planned to sell Rosebank’s oil at global prices, the fuel extracted from the site would not remain in Scotland or UK. He also slammed the UK government’s decision to commit to approving 100 new oil & gas licences, posting, “That isn’t climate leadership. It is climate denial.”

Why are climate activists opposing Rosebank?

Climate activists have already been seething over Mr. Sunak’s decision to water down the UK’s climate goals. Activists say that by pushing the ban on new petrol and diesel cars to 2035 and easing transition of home gas boilers to heat pumps, the UK will not be able to achieve its legally-binding 2050 net zero target. By estimations, Rosebank’s carbon emissions will be three times that of the nearby Cambo oil field — approximately 200 million tonnes of CO2, equivalent to operating 56 coal-fired power stations for one year.

The International Energy Agency (IEA) has indicatedthat for limiting global temperature rise to 1.5 degrees Celsius, no new oil and gas projects can be developed. The IEA has also estimated that demand for fossil fuels will fall by 80% by 2050 as more and more people switch to electric cars and solar panels. Hence, big oil fields like Rosebank are unnecessary for meeting energy demands, says the IEA.

Several British lawmakers have pointed out that Rosebank will not aid in bringing down household electric bills as most of the oil extracted (90%) will be sold to the global market across Europe. Equinor, meanwhile, has stated that its oil will be transported via the West of Shetland pipeline to support Europe’s ‘energy security.’ This will ultimately end up in the UK grid, securing the nation’s energy needs, the company avers.

What are the ecological effects?

The North Sea’s Faroe-Shetland Sponge Belt is host to deep sea sponges, a variety of clams and quahogs, already subject to a fragile ecosystem. In a protest held in January outside Downing Street, activists displayed a four-metre whale model — emphasizing the havoc oil pipelines will create when laid underwater along the migration corridor of the fin whale and the sperm whale.

During construction, noise pollution and sediment plumes would likely disrupt habitats of shellfish, marine mammals and cephalopods. Drilling may also harm delicate marine creatures like sponges, corals and slow-moving mammals. The biggest threat to marine life, however, is a deep-sea oil spill which would spread faster due to sea currents, damaging fauna like multiple species of fish, dolphins, orcas, and birds and disrupting the food chain in the area.

Windfall tax & oil incentives

Activists have also claimed that the UK tax-payers will hand over £3.75 billion to Equinor via tax breaks awarded to them by the government, just to develop Rosebank field for oil extraction. They further claim that once the plant is operational, the tax-payers are set to lose more than £750 million as Equinor will reap benefits from future tax breaks and profits earned in its oil sale.

However, Equinor and the UK government refuted any tax benefit for the oil company due to Rosefield. In the wake of the massive profits earned by oil companies during the initial days of the Russian invasion of Ukraine, the UK levied a 35% windfall tax called the Energy Profits Levy beyond the 40% corporation tax already imposed on oil and gas firms. Currently, oil companies like Equinor and Ithaca pay a 75% tax on their UK profits until 2028.

On the other hand, on June 9, 2023, the UK government announced the Energy Security Investment Mechanism which will go into effect post-March 2028. Under this scheme, if oil prices fall to normal levels (pre-Ukraine invasion rates) for a sustained period, then the tax for oil companies will return to 40%. The move is aimed attract investment in UK’s domestic oil fields — especially the North Sea region.