The Rosebank oil field go-ahead is the latest example of the UK government doing an oil deal through the back door, one that does not sit comfortably with its stated climate goals.
Norwegian oil company Equinor and North Sea developer Ithaca Energy PLC (LSE:ITH) said today they will invest US$3.8 billion in the North Sea oil project after getting consent from government body the North Sea Transition Authority.
In an inversion of the Robin Hood fable, the government is once again taking with one hand from green energy and giving more leeway to oil companies.
Its decision to approve the North Sea project, which will mine oil from the UK Continental Shelf, comes on the heels of prime minister Rishi Sunak’s weakening of climate change targets for electric cars and oil and gas boilers.
Sunak delayed a ban on petrol and diesel cars and vehicles by five years to 2035 this month, and similarly pushed back the deadline to cease oil and gas boilers in newbuilds to 2025.
This was not the first time that the prime minister watered down policies for green energy in order to benefit oil companies.
Last year, Sunak gave a tax rebate to oil companies that developed projects in the UK (equating to 91p per pound invested) despite calls for a windfall tax on big profit-making oil companies.
That came after public calls to siphon excessive profits from the big five oil companies (Exxon Mobil Corporation (NYSE:XOM), Chevron Corporation (NYSE:CVX), Shell PLC (LSE:SHEL, NYSE:SHEL), BP PLC (LSE:BP.) and TotalEnergies SE (NYSE:TOT, EPA:TTE)), which made a combined US$200 billion last year in the wake of Russia’s war on Ukraine.
The fate of the North Sea remains on a political knife-edge. The Labour Party has made a political bargain to stop oil and gas production in the North Sea in a move that union donor GMB branded “a huge mistake”.
The GMB’s justification for Rosebank is that it will be good for UK jobs. GMB general secretary Gary Smith said on Wednesday: “Taking responsibility for more of our own gas supply will support good union jobs, both directly and in the wider supply chain.”
Green companies unsurprisingly oppose the endorsement of Rosebank. Philip Evans, Greenpeace UK’s climate campaigner, claimed Sunak was “pandering to vested interests” with the approval and said the fossil fuel lobby has a “stranglehold” on decision making in government: “Rishi Sunak has proven once and for all that he puts the profits of oil companies above everyday people."
Rosebank is expected to cost £4.1 billion to develop, but could receive an effective taxpayer subsidy worth £3.75 billion through tax breaks.
Dr Paul Balcombe, senior lecturer in Chemical Engineering and Renewable Energy at Queen Mary University of London, said the latest rollback will make it “much more expensive” to hit climate goals, adding: “This is a rather comprehensive dismantling of the policy measures in place to get to the next deeper phase of decarbonisation."
Oil company Equinor claims the forecast emissions have already been included in UK government targets and accounted for in its carbon reduction strategy. The developer has defended the project by saying the floating oil rig will be powered by renewable electricity but has not yet decided what power solution to use, according to its website.
An insider within government policy said that often tax changes and other climate-related goals are hard fought within different factions of government.
It is not always clear who exactly has the leverage in these decisions, with civil servants working hard to protect carefully plotted climate goals and an increasingly wary attitude towards company profiteering.