Would veto on bumper Shetland development just fuel demand for imported oil?

AN intervention by campaigners has added fresh urgency to a debate about a proposed oil field development that was already pretty heated.

Oxfam has added its voice to the chorus of critics that have expressed outrage about Siccar Point Energy’s decision to seek official approval to develop the Cambo field West of Shetland, with Royal Dutch Shell.

Cambo is estimated to contain 800 million barrels, making it one of the biggest undeveloped finds on the UK Continental Shelf.

Work on the planned 170m barrel first phase development could provide a valuable shot in the arm for the North Sea supply chain amid tough times for many firms. The fallout from the coronavirus crisis took a grim toll on firms in Scotland as companies that operate North Sea fields slashed discretionary spending.

Giants such as Shell and BP are making plenty of money again following the rise in crude prices that has accompanied the rollout of coronavirus vaccines. However, it could take some time for any benefit to filter through to firms that provide support services.

READ MORE: North Sea cash engine motoring as Shell cuts Aberdeen jobs

Environmentalists insist that the regulator should refuse the request to develop Cambo on the grounds such a development would entail huge emissions of carbon dioxide over the life of the field. They say approval would be incompatible with the Westminster Government’s ambition for the UK to achieve net zero by 2050 and make a nonsense of its claims to be helping to lead international action. The UK will host the COP26 environmental summit that is set to bring world leaders to Glasgow in November.

On Monday Oxfam called on the Scottish Government to condemn the Cambo plans and urged the UK Government to stop the oilfield from going ahead.

It declared: “Removing emissions produced by the proposed Cambo oil project … would require an area of land one and a half times the size of Scotland.”

The criticism of Cambo formed part of a wider critique of the response of governments and oil and gas firms to the threat of climate change.

This highlighted the implications of schemes to offset emissions that will involve planting huge numbers of trees and the fact that net-zero plans appear to rely heavily on the widespread adoption of carbon capture and storage technology. Critics say CCS remains unproven and can be used as an excuse for people to keep burning fossil fuels.

READ MORE: Carbon capture plant pioneers eye locations in Aberdeenshire

Oxfam said: “Too many governments and corporations are hiding behind unreliable, unproven and unrealistic ‘carbon removal’ schemes in order to claim their 2050 climate change plans will be ‘net zero’.”

It added: “Their sudden rush of ‘net zero’ promises are relying too much on vast swathes of land to plant trees in order to remove greenhouse gases from the atmosphere. At the same time, they are failing to cut emissions quickly or deeply enough to avert catastrophic climate breakdown.”

Shell had questions about the numbers Oxfam came up with. It felt the report failed to recognise the range of nature-based solutions it was planning to promote and the actions it is taking to invest in renewables and to reduce emissions associated with use of its products.

A spokesperson said: “We have a clear target to become a net-zero emissions business by 2050, in step with society. Our total oil production already peaked in 2019 and we expect it to continue declining until 2030, including through divestments.

“We’re already investing billions of dollars in low-carbon energy. But the world will still need oil and gas for decades to come in sectors that can’t be easily decarbonized. Targeted investment in oil and gas will ensure we can supply the energy people will still rely on, while funding the rapid growth of our low-carbon businesses.”

READ MORE: ScotWind auction heats up as Italian oil giant plans bid

The comment followed signs last week that Shell bosses are becoming frustrated by the relentless criticism of the oil and gas industry, after working hard to develop strategies that they think will help them play a valuable part in the effort to slow climate change.

The strategies cover actions ranging from investing in large scale renewables projects to working with firms in hard to decarbonize sectors such as aviation and shipping to try to help them reduce emissions.

Asked last week about the prospect of curbs being imposed on oil and gas activity in the North Sea, Shell chief executive Ben van Beurden offered a combative response.

“As long as the UK still needs oil and gas in its consumption for its society … it’s better to produce it in its own back yard for the climate, for the balance of payments,” the Dutch executive told reporters.

“To just import oil and gas, which would be the alternative, from around the world, would obviously not serve the climate at all.”

Mr van Beurden added: “ I know that it’s quite often symbolically not what people would like to hear, but symbolism won’t help us with climate change.”

READ MORE: Shell boss defends North Sea oil and gas business as Shetland field plan angers campaigners

As if on cue developments in global gas markets have added force to claims that the UK may not be wise to take steps that would increase its reliance on imports.

Gas prices have surged to the highest levels since 2005 in the UK in a development market watchers reckon is linked to moves by Russia to limit exports amid a dispute with EU members about the NordStream 2 pipeline it is building.

Giants such as Shell say demand for oil and gas will not go away simply because we stop producing it in the UK. It makes sense then to maximise the recovery of the UK’s reserves while ensuring that emissions associated with exploration and production work are reduced as much and as quickly as possible.

Under the leadership of new chief executive Bernard Looney, BP has set out to become a net zero company by 2050.

Mr Looney wants to reinvent BP as an integrated energy company that will combine oil and gas production with hefty investment in renewables and decarbonisation initiatives across the supply chain.

When BP posted a $2.8bn quarterly profit on Tuesday, Mr Looney underlined the fact it aims to become a significant player in the offshore wind market in Scotland. The company bid for acreage in the ScotWind licensing round, which closed last month after generating strong interest around the world.

READ MORE: BP raises valuation of North Sea oil assets after bid for Scottish windfarm licences

Mr Looney said Aberdeen could morph from being an oil and gas base into an important centre of renewables activity for BP for years to come.

But in the quarterly results BP increased the valuation of its North Sea oil business in response to the rise in crude prices since November.

The uplift reflects BP’s expectation that demand will return to pre-pandemic levels next year and then remain strong.

Against that backdrop, the Oil and Gas Authority and the SNP Government are both in an awkward position regarding Cambo.

Although it is for the OGA to decide if the Cambo development can go ahead, the SNP Government has been accused by campaigners of sitting on the fence about the field.

READ MORE: SNP told to break silence on Cambo ahead of COP26

The SNP wants to keep the Green party onside in its attempt to separate Scotland from the rest of the UK. However, it fought the 2014 independence campaign on the premise that North Sea revenues would underpin the economy and it would not want to alienate people in the North East heartlands of the oil and gas industry.

Asked if it has a position on whether or not Siccar Point Energy and Shell should be allowed to develop Cambo, a Scottish Government spokesperson said: “We are wholly committed to becoming a net-zero economy by 2045 and, whilst this is ultimately a reserved area, any Scottish Government support for oil and gas businesses operating in the North Sea is conditional upon them contributing to a sustainable and inclusive energy transition, and ensuring a secure energy supply.”

The spokesperson added: “The oil and gas sector can play a positive role in Scotland’s energy transition, helping to design the diverse energy system we need for the future.

“The knowledge and experience of the oil and gas sector and its supply chain will also be important for developing and investing in essential low carbon technologies, such as Carbon Capture Utilisation and Storage – a technology that is seen by experts such as the UK Climate Change Committee … as being vital to achieving Scottish, UK and international climate emissions targets.”

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