UK's controversial Rosebank oil field gets the go-ahead

Norway's Equinor and London-listed Ithaca Energy have taken a final investment decision (FID) on the UK's Rosebank oil field after being granted consent from regulators to go ahead with the project, marking a major milestone in the long-running saga of one of the country's largest undeveloped oil and gas discoveries.

The FID on the first of two planned phases at Rosebank comes in the face of sustained pressure from environmental campaigners who want to block the development of new fields in UK waters and constraints on investment budgets in the wake of the country's windfall tax on North Sea profits. The government insists new projects like Rosebank are vital to help relieve the pressures on energy security and affordability caused by the war in Ukraine.

Equinor, which operates Rosebank with an 80pc stake, said today that the first phase of the project will target 245mn bl of the field's estimated 300mn bl of recoverable oil and will cost an estimated $3.8bn. The field will be developed using a redeployed 70,000 b/d floating production, storage and offloading vessel (FPSO), with start-up planned in 2026-27. Crude from Rosebank will be transported to refineries by shuttle tankers and gas exported through the West of Shetland Pipeline system to mainland Scotland, the firm said.

Rosebank was first discovered by Chevron in the UK's west of Shetlands region almost 20 years ago. But its challenging deepwater environment and extreme weather and sea conditions, together with a low level of infrastructure in the area, high cost estimates and several changes in ownership structure have stalled development over the years.

Equinor was one of the original partners in Rosebank but sold its stake to Austria's OMV in 2013. The firm re-entered the project in 2019 by acquiring Chevron's 40pc operating interest. It added a further 40pc this year after buying Canadian firm Suncor's UK business, a deal that also gave it a stake in Buzzard, one of the UK's largest producing oil fields. Ithaca inherited its 20pc through its takeover of private equity-backed Siccar Point Energy last year.

Chevron queried the economics of Rosebank as far back as 2013. Other oil and gas projects in the region have faced similar scrutiny - Shell agreed to sell its 30pc interest in the Cambo field west of Shetlands to Ithaca earlier this month, having complained that the economic case for investment was not strong enough. Shell made its decision to quit Cambo several months before the fallout from the Ukraine war prompted the UK government to slap a windfall tax on oil company profits last year, a measure that has since forced many operators to rethink their investment plans. Questions were raised about Equinor's commitment to Rosebank when the levy was first introduced, but the Norwegian firm dismissed claims that it was considering pulling out of the project as "pure speculation".

Economic viability aside, undeveloped fields such as Rosebank and Cambo have come under intense scrutiny from environmental groups in recent years. Greenpeace today described the government's decision to approve Rosebank for development as "nothing but carte blanche to fossil fuel companies to ruin the climate, punish bill payers, and siphon off obscene profits". Equinor insists that Rosebank's FPSO has been designed to be electrification-ready and that it is collaborating with government and industry "to pursue a regional solution for power from shore to Rosebank and nearby fields to minimise carbon emissions from production".

By James Keates