Start drilling at Cambo and Rosebank and shut down depleted oil wells, North Sea expert says

A major independent oil and gas company blamed the government's windfall tax on profits yesterday as it announced cut jobs and a review of its operations in the UK.

Harbour Energy said it is "reassessing its future activity levels" in the counry following an increase to the Energy Profits Levy (EPL) from 25 per cent to 35 per cent.

The firm, which is the biggest independent oil and gas firm in the UK, has not confirmed how many jobs will go but the vast majority of its British employees are based in Aberdeen.

Hide Ad
Hide Ad

The announcement came as a Scottish industry expert warned that drilling and production of oil and gas should go ahead as soon as possible the Rosebank and Cambo fields, as part of a long-term shift from fossil fuels.

Tom Baxter, a visiting professor at Strathclyde University and engineer with 40 years of experience working in the sector, said “mature assets” should be swiftly retired, cutting the environmental impact of any oil and gas produced in the North Sea in the future.

The waters around Scotland and the rest of the UK still contain around 15 billion barrels of oil, according to a report from the state-owned North Sea Transition Authority (NSTA). Rosebank and Cambo, off Shetland, are the UK’s two largest known untapped reserves of oil and gas.

But production, which had been expected to start in 2024 at Cambo and 2026 at Rosebank, has been hanging in the balance as controversy rages over the role of fossil fuels in driving climate breakdown.

And Harbour Energy announced yesterday it was reassessing its activity levels in the UK after the hiking of the windfall tax late last year.

Many oil fields in the North Sea are reaching the end of their productive life, but proposals to drill at new sites is causing ongoing controversy due to the role of fossil fuels in driving climate changeMany oil fields in the North Sea are reaching the end of their productive life, but proposals to drill at new sites is causing ongoing controversy due to the role of fossil fuels in driving climate change
Many oil fields in the North Sea are reaching the end of their productive life, but proposals to drill at new sites is causing ongoing controversy due to the role of fossil fuels in driving climate change

The business said that the changes meant that it must scale back investment in oil and gas exploration among other things.

The business is also understood to have told staff that redundancies might come – but a spokesperson would not provide any numbers.

“Following changes to the EPL (Energy Profits Levy), we have had to reassess our future activity levels in the UK,” the company told the PA news agency.

Hide Ad
Hide Ad

“We will continue to support investment on the many attractive opportunities within our existing portfolio, but we are scaling back investment in other areas such as new exploration licensing.

“As such, we have initiated a review of our UK organisation to align with lower future activity levels.”

The UK government this week announced that more than 100 bids had been received from companies seeking to open up new sites earmarked for drilling in the North Sea.

But Harbour Energy has said it would not bid for new licences due to the windfall tax, telling trade publication Energy Voice in December that it would not take part in the ongoing round.

In November, Chancellor Jeremy Hunt slapped another 10 per cent on the tax that oil and gas producers have to pay on their windfall profits, taking it to 75 per cent. The companies can offset most of this extra tax if they invest enough in the UK.

Mr Baxter told The Scotsman that oil and gas cannot be “switched off overnight” and there will likely always be some need for petroleum to make vital products such as medical equipment.

But he said drilling from new fields can be much greener than wringing out the last drops of oil from wells which are nearly empty.

This is due to the fact that the efficiency of the process decreases over time, with the amount of energy needed to retrieve each barrel of oil rising as the reserve is used up.

Hide Ad
Hide Ad

The drilling process pulls up water as well as oil from subsea rock layers, and as a field empties the percentage of water drawn gets bigger and also needs to be treated.

“The North Sea is a mature province and many producing oil fields are nearing the end of their commercial life,” he said. “They are in a place where, for every barrel of oil produced, the working asset has to produce around nine barrels of water.

“Producing those nine barrels of water requires a lot of energy.

“Energy is required to lift the water and oil to the surface from many thousands of metres below the seabed. Energy is also required to inject water into the oilfields to maintain pressure and sweep the oil from the rock pores.

“Cambo, being a new oilfield, will not produce significant quantities of water for a period of time. “Hence it will have a better than average emissions profile for many years.

“So shutting down the UK’s old, carbon-heavy assets and opening up sites like Cambo would have a significant beneficial impact on the UK’s offshore emissions and not increase oil production overall.”

According to UK government figures, the average carbon intensity for North Sea oil and gas production is around 0.17 tonnes of carbon dioxide equivalent for every tonne of hydrocarbons produced.

An emissions profile produced by Cambo developers suggests the field could produce oil with a lower than average rate of emissions for around 13 years.

Hide Ad
Hide Ad

But environmental campaigners have reacted angrily to the proposal.

Friends of the Earth Scotland oil and gas campaigner Freya Aitchison said: “By trying to open up vast new fields, these companies are willingly adding fuel to the climate fire engulfing the world.

“The UK government is denying the reality of the climate emergency by encouraging new projects like Rosebank and Cambo. Approving more new fields now will intensify the climate impacts people are enduring across the world, such as floods in Pakistan, deadly heatwaves in Europe and flooding in the UK.

“The science is crystal clear that we can’t allow any new oil and gas extraction at all if we are to stay within safe climate limits.”

Mr Baxter also believes that early retirement of mature fields could lead to further environmental benefits and a reduced bill for UK taxpayers burden if, instead of the planned full decommissioning of depleted wells when production is ceased, the infrastructure was cleaned up and left in place to be taken over by nature.

A decision on Rosebank and Cambo is yet to be made by NTSA regulators.

A spokesperson for the UK Department for Business, Energy & Industrial Strategy said: “The UK is leading the world on climate change and it’s vital we continue to maintain our energy security, by boosting our homegrown energy supply and strengthening our domestic resilience.

“We are fully committed to the legally binding target of achieving net zero greenhouse gas emissions by 2050, and our British Energy Security Strategy sets out plans to support our North Sea oil and gas industry, whilst supercharging our domestic renewable energy and nuclear capacity, as we transition to lower carbon energy.”

Hide Ad
Hide Ad

Holyrood has no control over licencing for petroleum extraction in Scottish waters, but ministers have announced a “presumption against oil and gas” in the new energy strategy for the country and a national target to reach net zero emissions by 2045 – five years ahead of the UK’s 2050 deadline.

Climate activists have called on them to “stand up to reckless plans to expand fossil fuels”.

The Scottish Government’s position is that oil fields which have licences but have not yet been developed – such as Cambo – should be subject to the UK government’s new climate compatibility checkpoint, but the benchmarks within that should be strengthened.

A Scottish Government spokesperson said: “As a responsible government, we have set out a pathway, through our draft Energy Strategy and Just Transition Plan, to ensure a fair and just transition for our energy workforce. Given the North Sea basin is mature and production is already in decline, any other course of action would only serve to put jobs and our economy at risk.”



Want to join the conversation? Please or to comment on this article.