Rosebank field, strategic development in the UK for decarbonization and energy security

The escalating global demand for hydrocarbons, fueled by a growing population and intensified industrialization, has taken a toll on the environment and poses substantial environmental challenges. Projections by the International Energy Agency indicate a demande surge of an annual average of 102 million barrels per day this year, climbing by 2.2 million barrels daily from 2022 values. Recognizing the pressing need for sustainable practices, innovative solutions and low-emissions projects is imperative. One noteworthy example is the United Kingdom's Rosebank oil and gas field, emblematic of a forward-thinking approach to mitigate environmental impact, operated by Equinor (80% working interest) since acquiring it from Chevron in 2018 alongside Ithaca SP E&P Ltd (20% working interest).

The total expected recoverable resources are estimated to be approximately 300 million barrels for phase 1 and 2. The field's production strategy involves the utilization of subsea wells, which will be connected to a redeployed floating production storage and offloading (FPSO) vessel for processing and offloading at the field. The capacity of the FPSO is expected to be around 70,000 barrels per day of oil, with emissions and sustainability concerns being actively addressed.

Rosebank aims to become one of the lowest carbon footprint oil and gas fields in the UK and the first to power operations with renewable electricity. For reference, currently the carbon dioxide (CO₂) intensity in the UK North Sea is circa 20 kg CO₂/barrels of oil equivalent (boe) on average, and according to Equinor, Rosebank will produce oil at about 12 kg CO₂/boe before electrification and less than 3 kg CO₂/boe after electrification. The estimated emissions from production operations (from fuel gas, diesel and flaring) at the FPSO assuming no electrification over life of field (worst case scenario) is circa 4.5 million metric tons of CO₂ equivalent (MMtCO₂e). Rosebank has been optimized to reduce carbon emissions through several initiatives and technologies. For one, the selected production facility will be a redeployed and refurbished FPSO which will be saving 250,000 t of CO₂ emissions as compared to having a newly built FPSO. Additionally, the FPSO will go through further modifications to allow for full electrification in the future. As stated by the operator, the electrification schedule is driven by the confirmation of power source, grid connections and necessary offshore and onshore consent as study work performed in 2021-22 concluded that future electrification is technically feasible. The equipment will also be designed to operate with a vapor recovery system and without the need for routine flaring or venting of gas associated with production (closed flared gas recovery system). The FPSO will be issued with a retrofitting system with energy efficient equipment, and it will use a digital twin and advanced reliability techniques to reduce offshore interventions.

Automated digital drilling will optimise energy efficiency, reduce greenhouse gas (GHG) emissions and drilling time/well length; operate with the fewest number of gas turbines required and optimisation of the field development strategy to minimise offshore facility power demand such as reinjection of the produced water to avoid overboard disposal. Leak detection and repair programmes will also be implemented to reduce methane fugitive emissions and an additional technology such as optical gas imaging cameras shall be evaluated in the future. It is expected that the closed flare gas recovery system will be used to direct emissions from well clean-ups and from the expected workovers for all production wells.

GHG emissions are expected to be the highest during the early field life (within the first five years) when drilling campaigns are underway. Also relative to production, emissions are expected to decrease over time due to reduced power demand on the turbines and lower production rates.

The valuation analysis in this article will assess the NPV @10% discount rate, the study will test various carbon pricing initiatives against fluctuating oil prices. Specifically, the UK Emissions Trading Scheme (ETS), initiated at $100/t CO₂e, Shell's Carbon Disclosure Project (CDP) at $128/t CO₂e, and a shadow carbon price which went under review by the High-Level Commission on carbon prices gave a price of $44/t CO₂e are considered as variables, the costs of which is based on the year we are reviewing. These initiatives play a proactive role in addressing and reducing GHG emissions, prompting governments and businesses to make crucial decisions about their emissions profiles and financial planning. Simultaneously, oil price assumptions are tested across low ($58/b), base ($84/b), and high ($110/b) cases, as well as intermediary scenarios.

The Rosebank field, encompassing both Phase I and II developments, demonstrates a robust after-tax net present value (AT NPV @10%) of $3,980 million under the standard carbon price and oil price scenario. To simulate a stress test, a low-case oil price scenario results in a reduction of AT NPV to $1,908 million (-109%) and by further pushing the stress test, allowing for more stringent carbon pricing initiatives (ETS and CDP), results show an AT NPV of $1,737 million (-129%) and $1,656 million (-140%) respectively. This resilience underscores that even under certain unfavorable conditions, Rosebank's valuations maintain a notably high level of economic viability which emphasizes the dual benefit of encouraging companies to venture into low-emission practices, thereby producing a lower carbon footprint while upholding sound economic feasibility.

The examination of projects like Rosebank underscores the pivotal role in investing in innovative technologies and solutions. The development of Rosebank will provide energy security and investment in the UK while supporting the UK's net zero target. Even without electrification over life of field, expected emissions from the development consist of a negligible proportion (1.6%) of annual emissions from the UK offshore oil and gas sector. Such project shows the imperative to align goals on sustainability and emissions reduction objectives while still maintaining a positive economic viability.

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.