The plan to drill for oil deep under the sea at Cambo, north west of Shetland, is “uneconomic” and would breach international targets to cut climate pollution, according to a new analysis by experts.
The think tank, Carbon Tracker, has found that the cost of extracting oil from Cambo would be too high to make it profitable if the COP26 climate summit succeeds in limiting global warming to well below two degrees centigrade.
Campaigners have reiterated their calls for Cambo to be cancelled, saying its climate cost would be “devastating”. The Labour Party has said it should not go ahead.
Two oil companies, Siccar Point Energy and Shell, have applied for permission from the UK Government to start taking up to 800 million barrels of oil from the Cambo field. But the development has run into widespread opposition from environmental groups, experts and politicians.
On 1 November 16 environmental groups wrote to the offshore oil and gas regulator, OPRED, demanding that consent for Cambo be refused. In August the First Minister, Nicola Sturgeon, asked the UK Government to “reassess” licences for oil and gas projects such as Cambo.
Now Carbon Tracker has released an analysis of the financial prospects for the oil field. It is based on scenarios from the 30-nation International Energy Agency (IEA) and data from Norwegian business intelligence firm, Rystad Energy.
Carbon Tracker concluded that the “breakeven oil price” for Cambo would be “significantly higher” than the marginal oil price under the IEA’s sustainable development scenario.
“The project is only financially viable if the world fails to limit global temperature rise to well below two degrees centigrade,” the think tank argued. Cambo risked becoming a “stranded asset, with little or no economic value”.
Carbon Tracker founder and executive chairman, Mark Campanale, said: “Cambo is uneconomic, and would not be financially competitive in a well-below two degree world.”
If the world was to keep alive the aim of limiting global warning to 1.5 degrees “this project is clearly amongst the first to fall by the wayside,” he added.
“The world has a great many existing oil projects that are lower cost than Cambo and that are ahead in the financial pecking order.”
The Ferret reported an earlier Carbon Tracker analysis in November 2019 which said that 10 oil companies were planning to invest £6.8 billion in six major new projects in the North Sea in breach of international targets to cut climate pollution.
Friends of the Earth Scotland called more investment in renewables and to ensure a just transition for workers. “Economics aside, the climate cost of Cambo would be devastating,” warned the environmental group’s Caroline Rance.
“This new research is further evidence that Shell and oil companies like them have no intention of staying within the agreed limit for dangerous climate warming. Oil and gas production must be phased out in a managed way over the next decade.”
Labour’s energy spokesperson at Westminster, Ed Miliband, also wanted a just transition. “We should not be going ahead with the Cambo oil field, the equivalent of running 18 coal-fired power stations for a year,” he said. “We need to phase out fossil fuels.”
The Ferret reported in October that the UK Government had accepted that it had powers to stop the Cambo development “in the public interest” after a legal challenge by campaigners.
Cover image thanks to iStock/akiyoko. This story was updated at 19.15 on 10 November 2021 to add a comment from Siccar Point Energy.