Equinor hails jobs impact of huge oil field off Shetland

Other oil and gas firms were probably happier with the contents of the speech Ms Reeves delivered last Wednesday than campaigners who looked to her to use tax policy to support their fight for what they see as climate and social justice.

Ms Reeves confirmed the rate of the windfall tax levied on North Sea oil and gas firms would increase and that the investment allowance introduced alongside it in 2022 would be scrapped.

The investment allowance has provoked outrage among greens, who reckon it subsidises wealthy corporations to pursue climate-harming plans.

Outrage has focused on claims that the allowance could help Equinor enjoy tax breaks worth £3.75bn in support of its plan to develop the 500 million barrel Rosebank field.

READ MORE: SNP Government dithers as North Sea oil industry faces crisis

The main beneficiaries of the breaks will be foreign powers. The Norwegian Government has a 67% stake in Equinor. The firm’s partner in the Rosebank project, Ithaca Energy, is majority-owned by Israel’s Delek.

Rosebank has acquired totemic status for environmentalists who claim it will lead to emissions on a catastrophic scale.

“Burning all of the oil and gas in this field will produce the equivalent of the annual emissions of 28 low-income countries combined,” claims Friends of the Earth Scotland. 

The campaigning group was outraged when Equinor and Ithaca won Government approval for Rosebank in September last year.

Opponents of Rosebank were cheered after Equinor said it might reconsider investing in UK oil and gas projects after Labour won the July general election on a pledge to introduce a ‘proper’ windfall tax.

Last week, however, the company appeared untroubled by the Budget measures.

A spokesperson told The Herald: “The Rosebank project is under execution, and has had good progress since we announced the Final Investment Decision last year.

“Start-up of production is expected in 2026-2027. There is no change to that.”

The comments will be welcomed by those who claim Rosebank will generate big benefits for Scotland.

READ MORE: Scotland's green jobs failure underlined by English city success

Equinor has said the project will create 2,000 UK jobs during its development phase and support around 500 during the lifetime of the field.

Campaigners appear to be relying now on a Scottish court to put a spanner in works.

Greenpeace and Uplift have launched a legal challenge to the former UK Government’s decision to approve Rosebank, which will be heard by the Court of Session in Edinburgh next week.

The applicants claim the decision was unlawful because the assessment process failed to take account of the scale of the emissions that will be generated by the use of the oil produced from Rosebank. These are categorised as Scope 3 emissions.

Uplift was delighted when the UK Supreme Court ruled in June that licensing authorities had to consider Scope 3 emissions when deciding whether oil and gas developments could be approved.

Equinor kept silent about the Court of Session action saying it does not comment on active litigation.

However, the spokesperson for the company said Equinor would continue to work closely with all relevant parties to progress the project. The spokesperson claimed Rosebank is vital for the UK given the expected benefits in terms of local investment, jobs and energy security.

Victory for campaigners in the Court of Session action may not cause as many problems for the Rosebank project as they hope.

Campaigners opposed to the planned Rosebank oil field development protest at Westminster (Image: Angela Christofilou / Uplift)

Oil and gas trade body Offshore Energies OEUK has downplayed concern about the Supreme Court judgement regarding Scope 3 emissions. Chief executive David Whitehouse said firms could readily comply with any additional disclosure requirements.

Supporters of Rosebank and other proposed UK developments insist that blocking them would do nothing to reduce global emissions.

Demand for gas and oil is expected to remain strong for years meaning the UK would just have to import more if it blocked schemes such as Rosebank.

READ MORE: Green energy output slump poses challenge for Scottish Government

Equinor made clear it expects to make plenty of money from the sale of oil and gas for some time last month when it acquired US shale gas asset for $1.25bn. The company cited “positive long-term demand indicators in the US gas market”.

Following BP’s third quarter results announcement last week chief executive Murray Auchincloss told analysts the London-listed giant expects demand for gas to increase in the coming decade.

While the price of crude has fallen in recent months amid concerns about the global economic outlook, BP managed to make $2.3bn profit in the latest quarter. The company is investing heavily in oil and gas projects that it thinks will generate big returns. Mr Auchincloss highlighted BP’s position in deep water basins such as the Gulf of Mexico.

BP also has significant interests West of Shetland, where it has developed bumper fields with Shell in recent years.

Shell underlined how much money giants are making from their core oil and gas operations as it posted a $6bn third quarter profit last week.

Shell and BP insist they support the drive to cut global emissions by investing in low carbon energy sources.

However, both have modified plans to cut oil and gas production and made clear that they will take a much tougher line than they did previously when it comes to assessing potential renewables investments.

READ MORE: Scottish wind energy drive will be hit by UK Government move

Against that backdrop Friends of the Earth was adamant that Ms Reeves had not gone far enough in the Budget.

Head of policy Mike Childs said: "Introducing a wealth tax on the super-rich, and significantly increasing the windfall tax on polluting oil and gas companies - which this budget failed to do - would go a long way to funding the fair, green measures we so desperately need. Today's announcement falls staggeringly short of what's needed to address climate and nature emergency.” 

Oil and gas industry leaders responded more positively to the Budget.

OEUK said the tax increases announced would put pressure on firms but noted Ms Reeves had recognised the role the oil and gas sector played in supporting high quality jobs and strengthening the UK’s energy security.

The organisation had warned in advance of the Budget that 35,000 jobs could be lost if the Government raised taxes too aggressively.

However, it became clear that firms were resigned to the rate of windfall tax increasing and braced for the investment allowance to go.

As expected Ms Reeves increased the rate of the windfall tax by three percentage points to 38%. That took the total headline rate paid by firms on UK profits to 78%.

The big concern among oil and gas firms was that Ms Reeves would axe other tax breaks, some of which they have enjoyed for years.

Ms Reeves left the capital allowances concerned in place, along with the decarbonisation relief introduced by the Conservative Government.

Oil and gas firms could use decarbonisation relief to fund investment in the windfarms they plan to use to power production facilities that currently rely on gas-fired generators.

Investors appeared to think the outcome of the Budget was good for the oil and gas sector with shares in a range of firms rising on the day.

Winners included Serica Energy, which plans to bring the venerable Buchan field in the Cromarty Firth back into production with NEO Energy.

Norwegian-owned NEO said it would “materially slow down” investment in UK projects in advance of publication of the Budget, which won grudging respect from the SNP Government.

Scottish finance secretary Shona Robison said the Budget was a step in the right direction as she highlighted measures it contained to increase investment.

But then the SNP Government could hardly have complained about any North Sea tax rises after turning its back on the oil and gas industry as it courted the green vote under Nicola Sturgeon.