Will paused Cambo oil plans mark the decline of North Sea drilling?

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Investors person pulled retired of a task to drill the Cambo lipid tract successful the North Sea. Does this people the extremity of caller lipid and state extraction successful the region?

Environment | Analysis 10 December 2021

By Adam Vaughan

Greenpeace Norway activists successful  kayaks face  Siem Day loading drilling infrastructure for the Cambo lipid  tract  connected  behalf of Siccar Point Energy and Shell Oil, astatine  Randaberg Industries, extracurricular  Stavanger, Norway.

Greenpeace Norway activists successful kayaks campaigning to halt drilling successful the Cambo lipid field

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800 cardinal barrels of lipid successful the seabed 125 kilometres westbound of Shetland successful the UK present looks apt to enactment successful the crushed aft an vigor steadfast enactment its drilling plans connected hold. UK steadfast Siccar Point Energy said contiguous it couldn’t proceed with the large task aft Dutch vigor steadfast Shell pulled retired of the Cambo lipid tract past week. “We are pausing the improvement portion we measure adjacent steps,” said Siccar Point Energy CEO Jonathan Roger successful a statement.

The shelving of Cambo wasn’t unexpected aft Shell’s exit, but raises questions implicit whether this infinitesimal marks the extremity of important caller lipid and state fields for the UK successful the North Sea.

Huge reserves of lipid volition person to stay untapped if the satellite is to conscionable its clime alteration targets. Globally, 58 per cent of lipid volition person to enactment unused to support aboriginal planetary warming to 1.5°C. Yet by governments astir the world would spot 60 per cent much lipid extracted by 2030 than needed to conscionable that somesthesia goal.

Extracting hydrocarbons successful the North Sea is simply a comparatively high-cost operation, and accumulation has been declining since it peaked astir the crook of the century. “The UK North Sea is simply a precise marginal field,” says Peter Atherton, an autarkic vigor analyst.

Yet the economics of the Cambo lipid tract stacked up capable to initially pull Shell and the backstage equity backers of Siccar Point Energy. That has changed. That is partially down to precise beardown absorption by environmentalists, who made the improvement a bellwether lawsuit astir whether the UK authorities should beryllium green-lighting immoderate caller lipid and state accumulation successful a twelvemonth erstwhile it was hosting the COP26 clime summit.

On 2 December, Shell said the economical lawsuit was nary longer “strong capable astatine this time” and cited the “potential for delays”. The hazard of ineligible challenges and nonstop enactment by campaigners, a dilatory determination by the UK government’s Oil and Gas Authority to o.k. the project, lukewarm nationalist enactment from the UK authorities and outright absorption from Scottish archetypal curate Nicola Sturgeon each added up. Together they resulted successful greater regulatory and governmental risk.

“It [the greater risk] volition propulsion different projects into the reddish and you won’t privation to prosecute them. It volition trim aboriginal concern successful the North Sea, for sure,” says Atherton. Sonya Boodoo astatine Rystad Energy successful Norway says: “Players are apt to beryllium acrophobic fixed caller events with Cambo and Jackdaw [a precocious rejected UK lipid field], with imaginable for regulatory delays oregon improvement program changes arsenic imaginable setbacks.”

Doug Parr astatine Greenpeace UK says that portion Cambo’s intermission sends a “significant signal” to investors astir the aboriginal of UK projects successful the North Sea, it doesn’t needfully mean the extremity of large caller projects successful the basin. “This was ever 1 of the marginal cases of North Sea improvement and it’s not arsenic elemental and straightforward that ‘Right, Cambo has gone truthful everything other volition travel successful its wake’,” helium says. 

Nonetheless, it is wide that the governmental and regulatory situation for large caller lipid and state projects is shifting successful the UK. The Scottish authorities is successful talks with an confederation of countries pledging to signifier retired caller production and tin marque beingness hard for caller schemes adjacent if it doesn’t person the powerfulness to assistance lipid and state licences. 

Meanwhile, the UK authorities has been promising since March to people details of a caller “climate compatibility checkpoint”, yet-to-decided criteria that could amusement a caller task is compatible with the UK’s thrust to scope net-zero greenhouse state emissions by 2050. Today’s quality doesn’t impact the plans for that.

Cambo’s standstill is simply a a triumph for clime campaigners and volition springiness intermission to investors successful aboriginal lipid fields. It volition besides summation reliance connected imports, says Atherton.

But the UK authorities is leaving the doorway unfastened to aboriginal projects: its manufacture regulator still has a strategy to maximise extraction, and 62 caller wells were drilled past twelvemonth alone. The alteration successful who wants to drill successful the North Sea – from lipid and state majors to private, equity-backed and autarkic firms with beardown absorption connected the portion – means it is apt they volition “want to cautiously forge up with improvement plans”, says Boodoo.

Today is improbable to people the extremity of caller schemes taking the North Sea’s hydrocarbons retired of the ground.

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