Oil in whose interest?

New Environment Secretary Steve Barclay faces a controversial issue as he takes on his new brief 

At the end of September, the North Sea Transition Authority, a government agency that regulates the UK oil and gas industry, issued its approval for drilling at one of the largest North Sea oil and gas extraction projects of recent years. The oilfield is jointly owned by Norwegian energy firm Equinor and British company Ithaca, who now have the go-ahead to proceed with exploiting it.

Rosebank lies 80 miles north-west of Shetland and is about three times the size of the neighbouring Cambo oilfield, on which development was paused by Shell over a year ago after strong environmental campaigning efforts. Estimates project that Rosebank could produce up to 500 million barrels of oil over the course of its decades-long lifespan. Output from the site will compose a sizable 8% of the UK’s domestic oil production between 2026-2030. 

The approval of the development has been heavily criticised by politicians and campaigners alike. Green Party MP Caroline Lucas described the decision as “the greatest act of environmental vandalism in my lifetime.” Scottish First Minister Humza Yousaf also expressed strong opposition. Even Conservative MP Chris Skidmore, who recently reviewed the UK’s climate targets, warned earlier this year that approving Rosebank would “undermine UK claims to climate leadership on the world stage, undermine what climate science tells us and undermine our efforts to achieve a net-zero Britain by mid-century.” 

Environmental campaigners have been unanimous in condemning Rosebank’s approval, arguing it compromises Britain’s climate commitments. Analysis conducted by the climate campaigning group Uplift earlier this year showed that the carbon emissions that would be generated from extracting the oil and gas from Rosebank would alone be enough to exceed Britain’s carbon budget during the peak years of production between 2028 and 2037. Friends of the Earth Scotland stated that burning all the oil and gas produced from the site would amount to the annual emissions of 28 low-income countries combined.

UK Prime Minister Rishi Sunak backed the Rosebank decision, citing energy security as the primary benefit of the project. The government’s Energy Security Secretary Claire Coutinho likewise expressed support for Rosebank, claiming ramping up domestic oil production would ensure “greater energy independence, making us more secure against tyrants like (Russian president) Putin.”

But many have contested the government’s claims that the domestically produced oil and gas will lessen energy market volatility or reduce utility bills in the UK. Indeed, a senior spokesperson for Equinor explained that the oil and gas extracted from Rosebank will be sold on international markets, meaning there will be no preference for UK demand. As such, whether the UK sources oil and gas from Russia, the United States or Norway, or indeed domestically, British consumers will be no less subject to market vicissitudes as a consequence of Rosebank. 

Another argument advanced by government supporters of Rosebank is that new oil and gas production is a necessary feature of the UK’s energy mix during the transition towards renewables. However, the International Energy Agency has already dismissed the compatibility of any new fossil fuel production with net-zero ambitions. Furthermore, details regarding government tax incentives for investment in the energy sector raise questions about the extent to which they are committed to accelerating a transition to renewables. 

In May 2022, when Rishi Sunak was chancellor, the government introduced the Energy Profits Levy (EPL), which included a windfall tax on oil and gas companies who had profited from market dynamics following Russia’s invasion of Ukraine. Another feature of the EPL was a tax incentive that was designed to assuage energy company’s fears that the levy would stifle investment in the North Sea. This incentive stipulated that companies could offset £91.4 for every £100 they invested in production. As such, the majority of the $3.8bn (£3.1bn) invested by Equinor and Ithaca in the first phase of development will be funded by the British taxpayer, as well as investment in subsequent stages of the project.

What undermines any claim that domestic oil production can contribute to a green transition is the fact that no analogous incentives have been offered by the UK government to the renewables sector so far. The Energy Generator Levy (EGL), introduced in January 2023, included a tax similar to that in the EPL and was targeted both at large energy firms with renewable, nuclear and biomass energy provisions in their portfolios. Companies selling low-carbon generated electricity have also benefited hugely from recent market volatility. But unlike the EPL, the EGL does not include a state provision to support investment in the renewables sector through tax reductions, in the way offered to oil and gas companies.

As of Monday 13 November, Steve Barclay commences his new role as Environment Secretary, and he will have to grapple with the consequences of the Rosebank decision, as well as the UK government’s broader commitment to oil. This policy approach may not just be personally challenging for Barclay to adapt to in his new role, but politically challenging for a party that is already struggling and lagging behind in the polls, especially among younger generations, for whom tackling the climate emergency remains pertinent.