Rosebank oil field: What is the row over the project?
The decision to approve drilling at a controversial UK oil field has been condemned by environmental campaigners but hailed by supporters as a big step in bolstering the UK’s energy security.
Rosebank, off the Scottish coast, has been given the go ahead by regulators the North Sea Transition Authority.
Prime Minister Rishi Sunak said it was the “right long-term decision” for securing oil supplies in the UK.
But critics said it would harm climate change targets and not reduce bills.
What is Rosebank?
Rosebank is an oil and gas field which lies about 80 miles north-west of Shetland and is one of the largest undeveloped discoveries in UK waters.
It is said to contain up to 300 million barrels of oil and is owned by Norwegian energy giant Equinor and British firm Ithaca Energy.
The approval for drilling comes after the government said it would issue hundreds of new licences for oil and gas exploration in the North Sea.
What will it produce?
The field is expected to start producing oil from 2026.
If drilling does start on time, Rosebank could account for 8% of the UK’s total oil production between 2026 and 2030.
Roughly 245 million barrels will be produced in the first five years of drilling, with the remaining 55 million being extracted between 2032 and 2051.
Though oil is the main product, the site will also produce gas.
About 1,600 jobs are expected to be created during the peak of construction. Long term, the operation will create 450 jobs.
Despite oil and gas output in the North Sea having declined in the last 20 years, the industry still employs more than 200,000 people
Will it mean lower energy bills in the UK?
Oil and gas from UK waters is not necessarily used here – it is sold on global markets.
What Rosebank produces will be sold at world market prices, so the project will not cut energy prices for UK consumers.
The Norwegian state oil company Equinor – which is the majority owner of Rosebank – has confirmed that.
“If the UK needs Rosebank oil, it will go to the UK through open market mechanisms”, said Arne Gurtner, Equinor’s senior vice president for the UK.
Emma Pinchbeck, chief executive of the industry body Energy UK, said the long-term solution for UK bills and energy security “is in reducing our gas demand”, rather then extracting new fossil fuels.
The government’s independent advisers on climate change, the Climate Change Committee (CCC), has said similar in response to the government’s plans to develop the UK’s remaining offshore oil and gas reserves.
Last year, it wrote to the then-chancellor, Kwasi Kwarteng, saying more domestic oil and gas extraction would have “at most, a marginal effect on prices”.
Oil also tends to be sent around the world to be refined – the UK does not have the capacity to refine all its own oil-based products.
Why is the site controversial?
The plan has faced widespread criticism due to its impact on climate change.
Last month 50 MPs and peers from all major parties warned approving the project would be “deeply irresponsible” and risked putting climate targets out of reach and would “nothing” to reduce household bills.
On Tuesday, the International Energy Agency renewed its assertion that no new oil and gas projects are needed if the world is to achieve its climate goals.
Its updated projection suggests fossil fuel demand will fall 80% by 2050 as new solar power and electric cars continue to grow.
Protests have been carried out against Rosebank in the run-up to its approval across the country, with some groups, such as Surfers Against Sewage voicing concerns over the impact of drilling on sea life.
Broadcaster Chris Packham has called the development an “act of war against life on Earth”.
How much tax do oil and gas firms pay?
Firms in the oil and gas sector pay a higher rate of tax than in other industries. Currently, companies such Equinor and Ithaca have to pay 75% on their UK profits until 2028.
This includes a 40% rate of corporation tax – much higher than the standard 25% most UK businesses pay. The government then imposed a 35% windfall tax, called the Energy Profits Levy, on the oil and gas sector in 2022 as firms made huge profits following Russia’s invasion of Ukraine.
However, oil and gas firms can reduce their tax bills by reinvesting their profits in new North Sea energy projects, thanks to a government incentive scheme designed to support the sector.
Equinor and Ithaca have invested $3.8bn (£3.1bn) in the first phase of the Rosebank project and will be able to claim back 91p for every £1 invested, but will ultimately pay a 75% tax rate on the project’s profits.
How will this impact net zero plans?
The UK has committed to reach net zero, which means no longer adding to the total amount of greenhouse gases in the atmosphere, by 2050.
The oil and gas regulator, the North Sea Transition Authority, said it took “net zero considerations into account” in approving the Rosebank project.
The government is adamant that it will meet its climate targets despite the field coming online, pointing out that transitioning to net zero does allow for some oil and gas to be used so long as the emissions are offset.
However, the International Energy Agency (IEA), which advises governments on energy policy, has said big oil and gas projects like Rosebank should not be needed because demand for fossil fuels is forecast to fall towards 2050.
What are politicians saying?
The UK government has welcomed the decision, with Energy Security Secretary Claire Coutinho saying oil and gas are part of the “mix on the path to net zero”.
She has argued it “makes sense” for the UK to use its own oil supplies and will enable the country to have “greater energy independence, making us more secure against tyrants like (Vladimir) Putin”.
Sir Keir Starmer has confirmed that Labour will not revoke the licence for the oil field if it wins the next election. He said that allowing exploration to go ahead would provide “stability” to the economy.
The Liberal Democrats are not expected to make a comment on the licence, but a party source has said that their position remains that Rosebank should not go ahead.
Meanwhile, Scotland’s First Minister Humza Yousaf has said he is “disappointed” by the decision and that he is concerned that the oil extracted will end up overseas.
Green MP Caroline Lucas saying the move was “morally obscene”, and called the move the “greatest act of environmental vandalism in my lifetime”.