INTERVIEW: Equinor's UK Rosebank oil project to be 'crown jewel' of decarbonization

Norway's Equinor is hoping the planned Rosebank project in the UK West of Shetland region will be a "crown jewel" and global benchmark for decarbonization of the upstream oil and gas sector, the company's UK and Ireland vice president, Arne Gurtner, said in an interview.

Speaking on the sidelines of the Offshore Europe conference, Gurtner acknowledged the timeline for approving the contentious 300 million-barrel oil project had slipped from earlier expectations, saying he hoped for a final investment decision by year-end. He played down the slippage in the timeline, saying delays were unsurprising and "pretty standard" for such big projects.

"It's a big investment for Equinor and our partner Ithaca Energy and we are on progress with the project and it's going well, and we are still on plan to hopefully announce [FID] by end-year," he said.

The project, which will mainly supply oil rather than gas, has been criticized by opponents, including Scotland's devolved government on environmental grounds.

However, Gurtner said it would be an important contributor to European energy security and pointed to shifting supply patterns since the Russian invasion of Ukraine. The floating production storage and offloading vessel, which is being refurbished after earlier use at a Norwegian field, will have a capacity of 70,000 b/d, according to project documents.

While the eventual destination of the crude is uncertain, "what we know is that most of the oil produced in Europe currently goes to the European market, and by a very big fraction. That is in a way contributing to the energy security in Europe," he said. Rosebank is a medium crude grade with an API gravity of 34.6-35.3. North Sea benchmark Dated Brent on Sept. 4 crossed the $90/b threshold for the first time since November 2022. Platts, part of S&P Global Commodity Insights, assessed Dated Brent at $91.94/b on Sept. 5.

Gurtner echoed the industry's criticism of the UK's frequently changed tax regime, which features a headline tax rate of 75% under the "energy profits levy" expected to remain in force until 2028. He said tax unpredictability had contributed to North Sea decline.

"As an international investor coming into the UK we are looking for predictability," he said. The tax situation "has affected [UK oil and gas] investment, and we are today on the UK continental shelf a declining business. And of course taxation is a big part of that story," he said.

BP collaboration

Gurtner briefly outlined studies being undertaken by BP and Equinor on bringing low-carbon electricity to West of Shetland facilities such as Rosebank and existing oil hubs Clair and Schiehallion.

Equinor and its partner in Rosebank, Ithaca, expect to spend GBP80 million ($100 million) on modifications to enable "electrification" of the FPSO, according to an environmental statement submitted to the authorities in 2022.

Reducing the emissions associated with the North Sea has become an industry priority, and the regulator, the North Sea Transition Authority, has called for "bold measures" to halve the industry's emissions by 2030 compared with 2018. Upstream operations such as process heating and operating turbines are thought to account for 3% of UK emissions, with diesel and natural gas combustion accounting for the bulk of operational emissions.

Equinor's plans for Rosebank will not immediately mean fitting the facilities with low-carbon electricity, but the design is meant to facilitate electrification as options become available.

Gurtner did not say what electrification solution would be chosen; there has been talk of a link to the 443 MW Viking wind farm project in the Shetland Islands, due for completion this autumn. While there is no suggestion a decision on electrification will coincide with the Rosebank FID, Gurtner said: "We are progressing the maturation of Rosebank and in parallel with that we are working on the West of Shetland electrification together with BP, and finding solutions to bring power into that area.

"We are looking at it from the lens of maximum decarbonization, ensuring that we get a really future-fit Rosebank asset that is a crown jewel, in a way for the UK, that benchmarks across the global portfolio on a decarbonization basis," he said.

Alluding to industry worries over the UK investment environment, Gurtner said Rosebank is part of a swath of UK investments by Equinor, including Dogger Bank, which when complete in 2026 could be the world's largest offshore wind farm, at 3.6 GW.

"We're looking from a total portfolio basis and all our energy investments into the UK," he said. "In that sense the UK is a very, very important market for us. We have a plan to invest about GBP10 billion ($12.6 billion) up to 2030, of which most of it is into the energy transition scope -- but oil and gas will be a major contributor still."

At the same event in Aberdeen, Gilad Myerson, executive chairman of Equinor's Rosebank partner Ithaca, warned investors were "voting with their feet" and the limited funds available for oil and gas projects were going elsewhere, in part due to the UK's unstable fiscal regime. However, Myerson predicted that in the event of a change of government at upcoming elections, major projects like Rosebank and Cambo would go ahead. Ithaca owns an 20% stake in the Rosebank area alongside Equinor.

"If you look at Rosebank & Cambo, they have lower emissions, they have a lower cost per barrel, they [bring] a huge amount of jobs and they're providing UK energy security, so we believe that any government that comes through will want to sanction these projects as well as additional projects," Myerson said.