The ruling Labour government has chosen not to oppose a legal challenge to the Rosebank oilfield’s expansion in the North Sea by environmental activists, as they believe it infringes the UK’s commitment towards achieving net zero emissions. The decision was taken a day prior to a court hearing in the Scottish capital, but the government insisted that this did not imply that the license for Rosebank, granted originally by the preceding Conservative administration, would be revoked. This situation has thrown the future of this major North Sea project into uncertainty. The Norwegian state-supported Equinor, along with its alliance, Ithaca has earmarked a budget of $3.8 billion (€3.4 billion) for its initial phase.
This could further aggravate the challenges faced by the UK’s oil and gas industry, which is already grappling with windfall taxes following Russia’s invasion of Ukraine in 2022 resulting in escalated energy costs for consumers. The industry has expressed its dissatisfaction with the Labour government, which decided to hike the windfall tax on oil and gas firms by 3 per cent, notwithstanding a drop in oil and gas prices since their peak in 2022.
Proponents stated that the North Sea Transition Authority’s green light for the Rosebank venture was illegal as it overlooked the climate effects of burning fossil fuels rather than simply extracting them. Uplift and Greenpeace separately sought a judicial review of this decision by the Court of Session in Edinburgh, Scotland’s top civil court, in December. The progress of the case had been halted while awaiting the result of an English court case where activists contested Surrey County Council’s approval for a drilling licence at a site near Horley in 2019.
This decision follows the Supreme Court’s ruling in favour of activists who cited that it was illegal for the council to sanction the project without insisting on an evaluation of downstream emissions. Having scored a decisive victory in the UK general elections in July, the Labour government stated it would not sanction fresh drilling licenses in the North Sea and would discontinue providing investment allowances which help businesses reduce their tax liabilities.
On Thursday, the government announced its decision not to oppose the campaign groups’ lawsuit would result in considerable savings for taxpayers.
Later this year, a consultation considering the refusal to issue new oil and gas permits, a key manifesto promise, will be initiated. This consultation is expected to form the foundation of “environmental directives”, giving the oil and gas sector “reliability”, as per government statements. Greenpeace UK’s climate team leader, Mel Evans, endorsed the government’s action as “wholly appropriate”.
Executive Director of Uplift, Tessa Khan, stated that the government made a “just admission” that the Rosebank project couldn’t proceed without a comprehensive assessment of its potential climate effect. She found it “amazing” that the extensive emissions from burning oil and gas had been disregarded thus far. Equinor, which holds an 80 per cent stake in Rosebank, reacted by saying: “In light of today’s pronouncement, we’re in the process of evaluating its effects. We will continue working closely with all relevant parties to push the project forward.”
Previously, the company indicated that the project is slated to commence oil production in 2024 and could contribute around £25bn to the UK economy over its assumed 25-year span.
– Copyright The Financial Times Limited 2024.