North Sea

The North Sea oil industry’s £6.8 billion plan to breach climate targets

Ten oil companies are planning to invest £6.8 billion in six major new projects in the North Sea in breach of international targets to cut climate pollution, according to an expert analysis.

In the next three years big oil multinationals from the UK, the US, Canada, Norway, Japan and Korea want to start exploiting new oil and gas fields off Scotland. But the carbon emissions that would result would accelerate dangerous global warming, experts say.

The financial think tank, Carbon Tracker, also warns that the new North Sea projects would be “deeply loss-making”. Multi-million pound investments would risk becoming “stranded assets”, it says.

The investors include the £218bn British oil multinational BP, the £193bn US Chevron corporation and the £86bn Norwegian state company Equinor. The Korean National Oil Corporation, Canada’s Suncor and Japan’s Sumitomo are also involved.

Campaigners are demanding a halt to new oil developments in the North Sea to prevent a “climate disaster”. But the offshore oil industry insists that continued investment is “fully compatible” with the UK government’s aim to reach “net zero” climate emissions by 2050.

Over 190 countries agreed at a summit in Paris in 2015 to reduce carbon emissions to limit rising global temperatures. They promised to keep the average rise “well below” two degrees centigrade and to “pursue efforts” to limit it to 1.5 degrees to prevent climate disruption.

Carbon Tracker has calculated how much additional carbon the world can burn without breaching those targets. It then compared that to what oil companies are actually planning to do in the North Sea.

The assessments are based on the sustainable development scenario developed by the 30-nation International Energy Agency. They also use industry investment data from the Norwegian business intelligence firm, Rystad Energy.

By far the biggest North Sea investment planned between 2020 and 2022 is £4.4bn in the Rosebank-Lochnagar field west of Shetland by Equinor, along with Suncor and Aberdeen firm, Siccar Point.

The second largest envisaged investment is £700 million in the Captain field in the Moray Firth by Chevron and the Korean National Oil Corporation. Britain’s BP is planning to put £400 million into the Capercaillie field in the central North Sea.

The research was done by Mike Coffin, an analyst at Carbon Tracker who was a BP geologist for ten years. Following earlier work identifying major global projects that breached the Paris climate targets, he examined industry plans for the UK sector of the North Sea.

“We identify potential oil projects which are estimated for sanction between 2020-22 which do not fit within the lower oil demand needed to achieve Paris goals,” he told The Ferret.

“We highlight six projects – owned by both the majors and a range of other oil and gas companies – that we anticipate to be deeply loss-making, were they to go ahead.”

Coffin added: “By investing in these projects, companies who have expressed an ambition to align with the Paris agreement would be contradicting that ambition by their decisions, exposing investors to the risk of stranded assets.”

Planned North Sea investments that breach climate targets

CompaniesNorth Sea projectsPlanned investments 2019-30
Equinor, Siccar Point, SuncorRosebank-Lochnagar£4.4bn
Chevron, Korea National Oil CorporationCaptain£700m
Pharis EnergyPilot£450m
Ping, SumitomoAvalon£450m
i3 EnergyLiberator£400m
Sources: Rystad Energy, International Energy Agency and Carbon Tracker. Converted from US dollars at $1=£0.77 and rounded.

In a separate report published on 1 November Carbon Tracker estimated the global cuts in production that the big oil multinationals would have to make by 2040 to abide by the Paris agreement.

It concluded that the two Texas oil giants, ConocoPhilips and ExxonMobil, would have to cut production by 85 and 55 per cent respectively. Equinor needed to make a 45 per cent cut, Chevron a 35 per cent cut, and BP a 25 per cent cut.

Altogether the world’s oil and gas industry should reduce production by more than a third by 2040, the report said. “If companies really want to both mitigate financial risk and be part of the climate solution, they must shrink production,” argued Coffin.

“The industry is trying to have its cake and eat it – reassuring shareholders and appearing supportive of Paris, while still producing more fossil fuels.”

Friends of the Earth Scotland has also investigated how the exploitation of the North Sea matched the Paris agreement. It concluded that emissions from the 5.7 billion barrels of oil and gas from fields that were already operating would breach UK commitments.

“We are currently heading for a climate disaster, with more floods, storms and droughts and the world’s poorest people and most vulnerable wildlife in the front line,” said the environmental group’s director Dr Richard Dixon.

“If you are in an emergency the first thing to do is stop making it worse. In this climate emergency the UK and Scottish governments’ continuing support for new exploration in the North Sea is inexcusable.”

He added: “Existing fields in the UK sector already contain enough oil and gas to blow our carbon budget. All exploration should stop now, no new licences should be issued and current fields should be run down over the next decade as part of a just transition to clean energy jobs.”

The protest group, Extinction Rebellion Scotland, attacked oil companies for not taking the climate crisis seriously. “They stubbornly and greedily continue to pump as much oil as they possibly can out of the North Sea in pursuit of private profit,” said spokesperson, Mim Black.

“Climate change, driven by carbon emissions – the majority of which are created by burning of fossil fuels extracted by these companies – is causing drought, extreme weather, fires, famine and war across the world, already causing thousands of people to flee their homes from Mozambique to California.”

Black added: “If this greed is allowed to continue, we face a future of climate apartheid – where the richest can afford to protect themselves from the worst effects of climate change, and the rest suffer hugely.”

According to the Scottish Greens, the planned investments betrayed the industry’s ambition to extract every drop of oil from the North Sea. “Governments around the world from France to New Zealand are halting further fossil fuel exploration, but here in the UK we are yet to look these companies in the eye and say things need to change,” said the party’s climate spokesperson, Mark Ruskell MSP.

“We owe it to communities in the north east to begin a transition away from oil and gas now, building a sustainable future as part of a Scottish Green new deal. We simply cannot continue to grow the oil sector, pretending that the climate emergency isn’t happening.”

He added: “Politicians are happy to lobby for eye watering subsidies for the industry and then in the next breath claim the rhetorical high ground on climate action. The majority of this generation of politicians are taking a catastrophically dishonest position.”

The Scottish Government backed the continued production of North Sea oil. “We are committed to achieving a net zero emissions economy and managing this fairly,” said a spokesperson.

“Our continued support for oil and gas exploration and production in the North Sea will now be conditional upon a sustainable, secure and inclusive energy transition.”

The Intergovernmental Panel on Climate Change had recognised that oil and gas would continue to play “a significant role” in the global energy mix to 2050, the government pointed out.

“As we make the much needed transition to a net-zero economy, maintaining production will help ensure domestic production can meet ongoing demand in Scotland as well as meeting most of the UK’s needs,” added the spokesperson.

“North Sea production is highly regulated, with some of the most advanced and comparatively least polluting production methods in the world, and maintaining domestic oil and gas production can lead to lower net global emissions. We are supportive of the sector’s plans to decarbonise oil and gas production.”

The offshore industry body, Oil and Gas UK, defended companies’ planned North Sea investments. “Continued investment in the UK continental shelf is fully compatible with the government’s net zero objective,” said the group’s upstream policy director, Mike Tholen.

“The Committee on Climate Change recognises that oil and gas will continue to be part of an increasingly diverse energy mix in the UK through 2050 and beyond, albeit increasingly in decarbonised form.”

He added: “As the International Energy Agency has identified, significant ongoing global investment in oil and gas involving hundreds of billions of dollars will be required even to meet its sustainable development scenario, consistent with the Paris goals.

“The UK is able to win global investment reflecting its competitive cost structure, stable regulatory framework and strong environmental oversight. Forgoing production would lead to the import of more oil and gas from distant locations and with likely higher emissions.”

Poll: should companies be allowed to develop new oil fields in the North Sea?

This story was published in tandem with the Sunday National.

Photo thanks to iStock/avstraliavasin

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