Why the British government must stand firm against further North Sea oil and gas development

Buckling to pressure from the Conservatives and others to approve the development of the Rosebank and Jackdaw fields in the North Sea would damage global efforts to avoid dangerous climate change, undermine the UK’s reputation for climate leadership, and fail to deliver many of the claimed benefits, writes Bob Ward.

After the Oil and Gas Authority gave the go-ahead for developing Jackdaw in May 2022, experts warned the previous Prime Minister, Rishi Sunak, that “if the UK allows any new development of oil and gas fields, it will severely undermine … claims of leadership by contributing to further oversupply of fossil fuels, and making it more difficult for the world to limit warming to 1.5°C”. But the Authority’s successor, the North Sea Transition Authority, went on to grant consent for Rosebank on 27 September 2023.

The Rosebank consent had been subjected to a Climate Compatibility Checkpoint which assessed whether emissions from future production might threaten the achievement of the UK’s domestic Carbon Budgets and target of net zero emissions by 2050. Since then, researchers at the University of Oxford have identified “significant flaws” in the way the Checkpoint operates. They found that it was particularly problematic that the Checkpoint does not take account of the so-called ‘Scope 3 emissions’ from the consumption of the oil and gas, and only counted the Scope 1 and 2 emissions resulting from the extraction and production processes.

On 29 January 2025, the Court of Session in Edinburgh ruled that neither of the consents should have been issued without considering the Scope 3 emissions. That ruling followed the landmark Finch ruling by the Supreme Court in June 2024 that a decision to allow the expansion of oil production at Horse Hill in Surrey should have taken account of the Scope 3 emissions from the eventual fuel consumption.

After Finch, the last Government announced that it would be providing new guidance for the Environmental Impact Assessments that accompany applications for the development of fossil fuel infrastructure. The North Sea Transition Authority is unlikely to consider applications for Rosebank and Jackdaw before the guidance is published, but the Government is under pressure now to grant them regardless of the implications for emissions – including from the Conservative leader, Kemi Badenoch. At Prime Minister’s Questions in the House of Commons on 5 February 2025, Ms Badenoch challenged Keir Starmer not to delay consents for the new fields, later that day writing on X: “The Prime Minister has the power to back our North Sea oil and gas fields, save jobs, and bring down bills. Why won’t he just do the right thing?”

Leadership is needed to override ‘business as usual’

We are at a critical point in international efforts to have a reasonable chance of avoiding dangerous climate change from warming of more than 1.5°C – which can only happen if we reach net zero global emissions of carbon dioxide and other greenhouse gases by 2050. The International Energy Agency (IEA) has made clear that new oil and gas development is inconsistent with this goal. Nonetheless, Equinor, which owns 80 per cent of Rosebank, announced on 5 February that it intends to increase oil and gas production by 10 per cent between 2024 and 2027, while scaling back investments in renewables.

Such a ‘business as usual’ approach to the oil and gas industry cannot continue. If the UK Government did agree to the Rosebank and Jackdaw development, it would signal to all other fossil fuel producers, including the United States and Russia, that it supports just such an approach.

The most recent assessment by the United Nations Environment Programme (UNEP) of current commitments by countries concluded that the world is on a path to warming of more than 3°C by the end of this century. Governments are due to submit by 10 February more ambitious ‘nationally determined contributions’ (NDCs) to the Paris Agreement in a bid to avoid this catastrophic level of temperature rise. The UK has already submitted its revised NDC, which includes a pledge to cut emissions by 81 per cent by 2035 compared with 1990. However, there is concern that President Trump’s decision to again withdraw the United States from the Paris Agreement may persuade other countries to weaken their efforts.

The UNEP report warned that “unless global emissions in 2030 are brought below the levels implied by existing policies and current NDCs, it will become impossible to reach a pathway that would limit global warming to 1.5°C with no or limited overshoot (>50 per cent chance), and strongly increase the challenge of limiting warming to 2°C (>66 per cent chance).” It concluded: “The next NDCs must deliver a quantum leap in ambition in tandem with accelerated mitigation action in this decade.”

To demonstrate international leadership on climate change, the UK Government needs to take responsibility not just for its territorial emissions, but also for how its actions might affect actions by others.

The UK backed a call at the COP29 United Nations climate change summit in Dubai in December 2023 to contribute to global efforts by “transitioning away from fossil fuels in energy systems, in a just, orderly and equitable manner, accelerating action in this critical decade, so as to achieve net zero by 2050 in keeping with the science”. Few fossil fuel producers, including the United States and Russia, will be convinced by a UK policy that is based on “do as we say and not as we do”.

An industry that is only profitable at the British consumer’s expense

The argument for stopping new developments in the North Sea is also backed by the economics.

According to latest figures published by the IEA, the UK was the 22nd largest supplier of oil and 20th biggest producer of natural gas in 2022. But the North Sea is a mature hydrocarbon basin, and production has been in steady decline over the past two decades, with newly-discovered reserves usually being smaller and located in places where the operating costs are higher.

An analysis published by the trade body Offshore Energies UK found that oil production declined by 36 per cent between 2019 and 2023, while natural gas production fell by 14 per cent. It warned: “Oil and gas investments have become a lot less profitable and competitive as commodity prices have fallen but not project costs and tax rates.”

Indeed, profits and investments in the North Sea slumped in 2019 due to low international prices for oil and gas. Government tax revenues from oil and gas also plummeted between 2015 and 2022, according to the Office for Budget Responsibility, and were even negative in 2016–17.

But oil and gas companies made record profits after wholesale prices spiked following Russia’s invasion of Ukraine. The price rises contributed to a surge in inflation and forced the Conservative Government to spend more than £58 billion in 2022–23 to protect households and businesses against high prices.

Equinor supplies almost 30 per cent of the UK’s demand for natural gas and more than 15 per cent of its demand for oil, but British investors receive only a fraction of its profits. Three-quarters of the company’s shares are owned by the Government of Norway or Norwegian private investors, while just 5 per cent of its shares are owned by British investors.

The latest figures published by the Department for Energy Security and Net Zero show that UK dependence on fossil fuels for energy fell to 71.8 per cent in the third quarter of 2024, its lowest quarterly level this century. However, domestic production of fossil fuels reached a record low level in the third quarter. Annual domestic production of natural gas has been equivalent to about half of domestic consumption for more than a decade.

The output from Rosebank and Jackdaw would also be relatively trivial compared with global production volumes. According to Equinor, the Floating Production Storage and Offloading vessel for the field will have a capacity for 70,000 barrels of oil per day. This is less than 0.2 per cent of the current global demand for oil, which averaged 46 million barrels per day in 2023, the IEA’s latest analysis shows.

Hence, oil and gas production from Jackdaw and Rosebank would make no significant difference to international market prices for oil and gas and would not reduce bills for British households and businesses, despite Ms Badenoch’s claim.

British domestic and industrial consumers having been paying higher prices for electricity than counterparts in many other countries over the past five years. Researchers at University College London found that UK electricity prices were set by the cost of natural gas more than 98 per cent of the time in 2021, far more often than in other countries. According to data from Ofgem, the energy regulator, the monthly average day-ahead market price for natural gas in Great Britain is now much lower than it was during the early days of Russia’s invasion of Ukraine, but is still significantly higher than it was between 2010 and 2021.

The Office for Budget Responsibility warned in its July 2023 report on Fiscal Risks and Sustainability: “Until the UK reduces its dependence on gas, the country is likely to remain heavily reliant on gas imports from abroad, given declining North Sea reserves. In the event of further gas price spikes similar to the scenario covered at the end of this chapter, the UK, as a large net importer of gas, would see further significant negative terms of trade shocks in the future. Households reliant on gas for both heating and electricity would be among the worst affected.”

The truth is that the North Sea oil and gas industry is only really profitable when British consumers are paying high prices for petrol, gas and electricity. It is clear that the best way to lower bills and increase energy security is to reduce the UK’s dependence on fossil fuels and instead to rely on British supplies of clean energy.

Diverting the path to sustainable growth

In addition, a decision to allow new fossil fuel development would send mixed signals about the Government’s overall approach to the transition away from oil and gas, and potentially hurt the confidence of investors in clean energy. This confidence has already been knocked by confusion about the Government’s commitment to the statutory target of reaching net zero emissions by 2050.

For instance, some media reported that the Chancellor of the Exchequer told an audience last month at the Annual Meeting of the World Economic Forum in Davos that the Government’s mission to increase economic growth “trumped” the net zero target. However, in a speech on 29 January, Rachel Reeves stated: “There is no trade-off between economic growth and net zero. Quite the opposite. Net zero is the industrial opportunity of the 21st century, and Britain must lead the way.”

Robust analysis reveals that investment in alternatives to fossil fuels offers the best opportunity for sustainable economic growth. Backing the development of dirty energy sources in the North Sea would reveal the Government’s policies as confused and incoherent, casting doubt on its commitment to a rapid but orderly transition away from fossil fuels and undermining the confidence of investors in clean energy. And without investment, the Government will not achieve its mission to kickstart economic growth.