UK gives go-ahead for contentious 300 million barrel Rosebank oil project

UK authorities on Sept. 27 approved Equinor's development of the 300 million barrel Rosebank oil project in the West of Shetland area, with the first development phase expected on stream in 2026-27 and expectations of billions of dollars of upstream investment.

Rosebank is a medium-light crude with an API gravity of 34.6-35.3, making it heavier than the mainstay Brent and Forties grades, but lighter than BP's West of Shetland crude production. The crude will be loaded directly onto shuttle tankers from a Floating Production Storage and Offloading vessel.

Sanctions against Russia's Urals have made medium and heavier grades more attractive, with Norway's Johan Sverdrup trading at a premium to Dated Brent. However, uncertainty surrounds the longer term sanctions regime and any effect for Rosebank pricing.

The Platts Dated Brent benchmark was assessed on Sept. 26 at $94.14/b, up 74 cents on the day.

Output from Rosebank is expected to peak at 69,000 b/d of oil and 44 MMcf/d of gas -- its lower volume suggesting a lesser impact on the market than Sverdrup. However, the low emissions associated with the production are seen as a selling point by comparison with global crude streams such as Urals.

The field approval was denounced by environmental groups such as Greenpeace, but comes after the International Energy Agency on Sept. 26 softened its call for a halt to all new oil and gas projects under its net-zero scenario, restricting this call to "long-lead-time" fields. The UK government under Prime Minister Rishi Sunak has made a number of shifts to soften its net-zero emissions strategy, including a five-year delay to a ban on new conventional car sales, announced Sept. 20.

"Developing the Rosebank field will allow us to grow our position as a broad energy partner to the UK, while optimizing our oil and gas portfolio, and increasing energy supply in Europe. Rosebank provides an opportunity to develop a field within the UK continental shelf, which will bring significant benefits to Scotland and the wider UK," Equinor executive vice president for projects, drilling and procurement, Geir Tungesvik said.

Energy security shift

The Department for Energy Security & Net Zero defended the decision to go ahead with approval despite objections from environmentalists, saying: "The UK still relies on oil and gas and this will continue to be the case over the coming decades. As the government takes forward a pragmatic, proportionate and realistic response to the path to net-zero, a key part of this will be maintaining our domestic oil and gas industry which underpins our energy security and boosts the UK economy."

The decision marks the first major approval of a UK upstream project in several years and comes as the industry has been warning of a loss of confidence due to punitive and unstable upstream taxation. Equinor said it would move ahead with a first phase of the development targeting 245 million barrels of oil, as well as associated gas.

It was also welcomed by Equinor's partner in Rosebank, Ithaca Energy, which holds a 20% stake in the license area, and is promoting another major West of Shetland oil project, Cambo, thought to hold hundreds of millions of barrels.

For the wider North Sea industry including its supply chain in Scotland the decision represents a welcome shot in the arm.

The UK government and Equinor estimate total expected direct investment in Rosebank over its lifetime at GBP8.1 billion ($9.8 billion), with the first phase estimated by the Norwegian company to cost $3.8 billion.

"We need more projects like Rosebank if we are serious about homegrown UK energy future," industry group Offshore Energies UK said, estimating Rosebank would represent 8% of UK oil output in 2026-30.

"This is good news for our jobs, our economy, and our secure energy future. By promoting homegrown production, we avoid costlier, higher carbon imports while making more reliable supplies of energy in the UK, for the UK," OEUK CEO David Whitehouse said.

Low-carbon credentials

The Rosebank design features a provision for the facilities to be hooked up to a low-carbon power source such as a cable from the Shetland Islands, enabling a further reduction of emissions generated by processes such as heating and injection. Equinor has stressed it also involves refurbishing an existing production vessel previously used offshore Norway, rather than building from scratch.

"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," Equinor UK and Ireland vice president Arne Gurtner told S&P Global Commodity Insights earlier in September.

Equinor and BP have been trying to develop a low-carbon electrification solution for West of Shetland oil and gas facilities, possibly sourcing power from the Viking wind farm project in the Shetland Islands, however, this is still at the concept development stage.

With such a solution, Equinor estimates Rosebank's lifetime upstream CO2 intensity would decrease from 12kg to about 3kg of CO2-equivalent/boe of production, the company said.