The UK government has given a green light to a large new North Sea gasfield that was seen by the energy industry as a “test case” for whether ministers would deliver on promises to increase domestic fossil fuel production following Russia’s invasion of Ukraine.
The Jackdaw project, in waters 250 kilometres east of Aberdeen, is expected to account for 6.5 per cent of total gas output from the UK North Sea when it starts production, potentially as early as 2025, according to its developer, the oil major Shell.
But the scheme has proved highly controversial with climate campaigners. It was rejected by oil and gas regulators on environmental grounds last year, shortly before the UK hosted the COP26 UN climate summit in Glasgow.
Since then the political mood towards the UK’s domestic hydrocarbons industry has shifted substantially as the government seeks to secure more energy supplies because of the war in Ukraine.
Shell, which has been working on Jackdaw for a decade, submitted revised plans to regulators in March.
Business secretary Kwasi Kwarteng said the government was “turbocharging renewables and nuclear, but we are also realistic about our energy needs now”. “Let’s source more of the gas we need from British waters to protect energy security,” he tweeted.
The UK oil and gas industry had been nervous about the outcome of the Jackdaw application as developers remain rattled by the clamour last year around the Cambo oilfield west of the Shetland islands.
Cambo, a joint project between Shell and private equity-owned Siccar Point Energy, became a lightning rod for criticism of the UK’s continued support for the fossil fuels industry, despite the government’s adoption of a legally-binding 2050 “net zero” emissions target. Shell later said it would withdraw from the project, citing economic reasons.
“Nobody wanted to be the next Cambo,” said one senior North Sea oil and gas executive, adding that Jackdaw was therefore a “test case” on several fronts.
Shell said on Wednesday that it intended to press ahead with Jackdaw now that it had finally secured approval.
The oil major’s assurance will come as a relief to chancellor Rishi Sunak, who last week faced a bitter backlash from oil and gas producers after he announced a multiyear 25 per cent windfall tax on the industry. The windfall announcement had shocked the North Sea industry as producers had only anticipated a one-off levy.
The additional tax will remain in place until the end of 2025 unless oil and gas prices return to “historically more normal levels”. However, the levy was accompanied by new investment allowances designed to encourage companies to press ahead with projects to reduce their tax bill.
Shell insisted that “responsibly produced, local gas production plays an essential role in the UK’s transition to net zero” and formed part of its broader “intent” to invest £20bn to £25bn in the UK over the next decade.
But, in a warning shot to the chancellor over future investments, it added: “However, as we have repeatedly stated this can only happen with a stable fiscal policy and we continue to look to the government for those assurances.”
Environment group Greenpeace said it would consider taking legal action against Jackdaw’s approval. “Approving Jackdaw is a desperate and destructive decision from Johnson’s government,” said Ami McCarthy, political campaigner for Greenpeace UK.