- Rosebank is the UK's largest undeveloped oilfield, with 245mn recoverable barrels of oil estimated in phase 1
- Build cost estimated around £3bn, with production by 2027
The UK will keep extracting oil and gas from the North Sea for decades to come after the regulator gave the green light to the Rosebank oilfield and majority owner Equinor (NO:EQNR) approved the "final investment decision". Shares in its partner Ithaca Energy (ITH) were up 8 per cent with the company working on the assumption Rosebank would go ahead – the floating, production, storage and offtake (FPSO) ship that will be used as a hub for the field have already been built.
The North Sea Transition Authority (NSTA) said the decision was made "taking net zero considerations into account throughout the project's lifecycle".
Ithaca owns a significant proportion of the UK’s future oil and gas supply, through the Rosebank and Cambo projects. It owns all of Cambo – pending a deal with Shell (SHEL) to buy up the last 20 per cent it does not hold – and 20 per cent of Rosebank.
“Rosebank stands as the largest undeveloped field in the UK, and with the receipt of development consent from the NSTA, we are now poised to embark on a journey that will not only provide critically important domestic energy but also ignite substantial economic impact,” said Ithaca executive chair Gilad Myerson.
Rosebank has been the focus of significant lobbying by environmental groups, who argue the commissioning of a major new oilfield will lock the UK into oil and gas use. “[This is] a disaster for the climate and for people's energy bills,” said Greenpeace UK. Equinor and Ithaca were keen to emphasise the project-level emissions reduction options, including electrification of the FPSO. But the operational emissions are tiny compared to the CO2 released from burning the extracted oil and gas, estimated at 200mn tonnes. "Rosebank will cost us dearly," said Tessa Khan, executive director of advocacy group Uplift.
The project is expected to reach production by 2027.
Jefferies analyst Mark Wilson said the decision was a positive "for the UK North Sea offshore sector as a whole".
Ithaca's Cambo development faces more hurdles, given it must fund the project itself. Lending to the industry has slowed down significantly, as banks cut oil and gas exposure, while the energy profits levy and higher interest rates have also had an impact. Earlier this month, Wilson shifted Cambo out of his net asset value forecast for Ithaca because of "lack of commercial progress". Earlier this month, Ithaca said it would buy Shell's stake in the project after trying to find a third-party buyer.
The arrangement also allowed for Ithaca to take on the stake itself, at a price of $1.50 (£1.20) per barrel of oil equivalent included in the P50 resource, equal to around $78mn. This won’t be paid until first oil, however, so will have little upfront impact beyond increasing Ithaca's share of the build costs. Peel Hunt forecasts a final investment decision by mid-2024.
