According to a report by Wood Mackenzie (Woodmac), the announcement by Equinor and Ithaca Energy to go ahead with the Rosebank deepwater oilfield project in the West of Shetland basin could lead to more fields being approved, Woodmac highlighted in a release posted on its site.
“As the biggest final investment decision (FID) in 20 years, Rosebank will account for eight percent of UK liquids output at peak in 2027/28,” Gail Anderson, Woodmac’s Research Director for the North Sea, said in the release.
“Following this FID, there is more likelihood of other nearby fields such as Cambo progressing,” Anderson added.
Woodmac noted in the release that the report states that, despite the decision to develop Rosebank, the project still faces future fiscal risks, especially around the UK government’s windfall tax for energy companies – the Energy Profits Levy (EPL).
“A change of government at the next election could result in the removal of the 29 percent Investment Tax Allowance under the EPL,” Woodmac said in the release.
“The UK’s well-earned reputation for fiscal disruption means that Rosebank will face major risks whoever governs the country next year,” Anderson went on to state.
“Any future toughening of the EPL could make Rosebank’s economics marginal,” Anderson continued.
On September 27, the North Sea Transition Authority announced that it had granted development and production consent for the Rosebank field. A statement posted on the UK Department of Energy Security and Net Zero’s website said the government welcomed the decision by regulators to approve the new Rosebank development.
When Rigzone asked industry body Offshore Energies UK (OEUK) for reaction to the Rosebank approval, OEUK noted in a statement sent to Rigzone that it “hailed the UK government’s decision to approve the new Rosebank oil and gas field”.
“We need more projects like Rosebank if we are serious about homegrown UK energy future,” OEUK said in the statement.
“At its peak, Rosebank could produce 69,000 barrels of oil (9,000 tons) per day – equivalent to eight percent of the UK’s entire output between 2026 and 2030. It could also produce in excess of 21 MMSCF of natural gas every day, equivalent to the daily average use of Aberdeen city,” OEUK added.
Although OEUK highlighted in the statement that the approval marks an important milestone in the UK’s energy reform, the industry body said that, over its lifetime, Rosebank will only meet eight months’ worth of UK demand, “meaning more projects will be needed to manage reliance on imported oil and gas as UK production declines”.
In the statement, OEUK CEO David Whitehouse described Rosebank’s approval as “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. We need more projects like Rosebank if we are serious about delivering a homegrown UK energy future,” he added.
“We have around 283 fields in the North Sea, but over 180 of those will stop producing within the next decade. If these are not replaced, we will import 80 percent of the oil and gas the UK … will need at a higher cost to the consumer, our economy, and ultimately the climate,” he continued.
“Our latest Economic Report found $42.85 billion (GBP 35 billion) could be spent in the next decade on offshore oil and gas projects, but businesses need renewed certainty to sign off. This announcement is step in the right direction, but more needs to be done to secure the private investment that underpins the jobs for our homegrown energy future,” Whitehouse went on to state.
Equinor and Ithaca Energy announced in separate statements this week that they had taken the final investment decision to progress Phase 1 of the Rosebank development on the UK Continental Shelf.
The companies revealed that they will invest $3.8 billion in the project, which is located around 130 kilometers north-west of Shetland in approximately 1,100 meters of water depth. Total recoverable resources are estimated at around 300 million barrels of oil, with Phase 1 targeting an estimated 245 million barrels of oil, Equinor, which owns 80 percent of the development, and Ithaca, which owns 20 percent, outlined.
To contact the author, email andreas.exarheas@rigzone.com
Read More: Rosebank Approval Could Lead to More Green Lights