Two Edinburgh-based investment firms are shareholders in an energy company which plans to develop two of the largest untapped oil fields in the UK North Sea.
Aberforth Partners and Baillie Gifford hold respective 8.06 and 5.65 per cent stakes in EnQuest, an independent oil and gas company which owns the rights to the Bressay and Bentley oil fields off Shetland’s east coast. As of June 2021, Baillie Gifford also invested MSPs pensions in EnQuest in its role as manager of the Scottish Parliamentary Pension Scheme.
Bressay and Bentley — the third and fifth largest potential new developments in the UK North Sea — could together produce the equivalent of 147 million tonnes of carbon dioxide over their lifetimes. This is more than three times the emissions produced by Scotland as a whole in 2019.
Environmental campaigners accused the investment firms of being “happy to profit from the destruction of our life support system”. Any investor still backing companies in the fossil fuel industry “has got questions to answer”, they added.
The trade association for the UK offshore oil and gas industry, OGUK, said that the “current oil and gas price and supply crisis underlines pretty starkly” the need for projects like Bentley and Bressay. The Ferret has contacted EnQuest directly for comment but is yet to receive a response.
Anyone investing in companies expanding the fossil fuel industry has got questions to answer.
Adam McGibbon, UK campaign lead at Market Forces
Both Aberforth and Baillie Gifford said that they would not be responding to a request for comment on the findings. Both companies’ governance statements note that climate risks are factored in when they make investment decisions.
At the start of January 2022, The Ferret reported there were still 29 new oil and gas projects in the North Sea pipeline following Siccar Point Energy’s decision to pause the controversial Cambo project.
Among these developments were four new fields — including EnQuest’s Bentley — with the potential to produce more fossil fuels than were anticipated from the first phase of Cambo.
According to data from Rystadt Energy, an independent energy research company, Bentley could produce the equivalent of 250 million barrels of oil and 102 million tonnes of carbon dioxide emissions over its lifetime, while Bressay is expected to produce 120 million barrels of oil and 45 million tonnes of carbon dioxide emissions.
In 2019, Scotland produced the equivalent of 47.8 million tonnes of carbon dioxide emissions. This figure does not include emissions produced by oil and gas companies in the North Sea.
As well as its shares in EnQuest, Baillie Gifford still had a considerable holding in Dutch oil giant Shell until 2020. Shares in Shell made up 21.3 per cent of the total carbon emissions in Baillie Gifford’s UK core investment portfolio in 2020, with EnQuest shares making up a further 15.5 per cent.
Baillie Gifford’s equity in Shell was sold in May 2020 because the company became “increasingly concerned about the short-term and long-term challenges facing the oil majors”.
MSPs had £58,256 invested in EnQuest through their Baillie Gifford-managed pension scheme as of June 2021. Baillie Gifford did not confirm whether this investment is still in place.
The Scottish Parliamentary Pension Scheme also invested £94,525.72 in Equinor which owns the Rosebank oil and gas field, the biggest prospective project in the North Sea pipeline. A representative of Baillie Gifford said that it no longer invests in Equinor, though.
Meanwhile, shares in EnQuest make up 1.5 per cent of Aberforth’s investment portfolio. It also has shares in another oil and gas company, Petrofac, which has assets in the North Sea.
10 largest potential UK oil and gas projects
| Project Name | Developer | Lifetime production (mboe) | Lifetime emissions (MT) |
|---|---|---|---|
| Rosebank | Equinor | 325 | 168 |
| Clair South | BP | 293 | 151 |
| Bentley | Enquest | 250 | 102 |
| Glengorm | CNOOC | 198 | 92 |
| Bressay | Enquest | 120 | 45 |
| Isabella | Total | 99 | 44 |
| Pilot | Orcadian Energy | 88 | 41 |
| Cheviot | Alpha Petroleum | 79 | 37 |
| Glendronach | Total | 72 | 36 |
| Jackdaw | Shell | 61 | 22 |
Risks of Investment
Sally Clark, a divestment campaigner at Friends of the Earth Scotland, told The Ferret that Scotland needs “financiers who are willing to back a fair and fast transition to renewable energy and green jobs, instead of investing in endless oil and gas extraction”.
Clark said: “Opening up huge new oil fields is denying the reality that we need to urgently phase out oil and gas if we are to stay within the agreed 1.5C limit of dangerous climate warming and protect the lives of millions of people.
“These companies are happy to profit from the destruction of our life support system.”
Adam McGibbon, UK lead at campaign group, Market Forces, argued that “the science was clear” that no new oil and gas projects can go ahead if we are to meet climate targets.
“Baillie Gifford and Aberforth need to explain how they are responsibly managing their client’s money if they are investing it in climate destruction,” McGibbon said.
“Anyone investing in companies expanding the fossil fuel industry has got questions to answer.”
Natalie Coupar, communications director at the North Sea trade body, Oil and Gas UK said: “The current oil and gas price and supply crisis underlines pretty starkly why these projects are needed.
“UK offshore energy companies are rapidly scaling up greener technologies like wind, hydrogen and carbon capture — the number of traditional oil and gas companies involved in last week’s ScotWind offshore wind energy being a great example.
“But we can’t switch overnight. Oil and gas still caters for 73% of the UK’s energy needs, so it needs to be a managed transition to avoid lights and power going across the country.”
Neither Aberforth nor Baillie Gifford wanted to comment directly on their investment in EnQuest. Both companies’ governance statements note that climate risks are factored in when they make investment decisions.
Aberforth’s statement on Governance and Corporate Responsibility points out that “the firm takes meaningful stakes in businesses that may have a substantial environmental impact or may be at risk from climate change”.
The statement continues that “considerations of such risks are integrated into the investment process, which acknowledges their potential effects on company valuations”.
In a recent blog post, Baillie Gifford said that all of its investment strategies “are aware and are thinking about the possible impacts of climate change on portfolio holdings”. But it also notes that climate change is “complex and nuanced, and every company should be analysed and considered on its own merits”.
This story was updated at 16:42 on 26 January 2022 to reflect that Baillie Gifford had sold its holding in Shell in May 2020.
Photo Credit: iStock/Gumpanat
