Giant oil & gas projects on thin ice as UK pulls out of court battle: Will Shell and Equinor get cold feet or take a stand against legal challenges?

While two huge oil and gas projects in the waters off the coast of the UK have been walking a tightrope for some time, their operators, Britain’s Shell and Norway’s Equinor, did not waiver in their commitment to enriching the energy market with these resources and both hydrocarbon developments previously overcame the obstacles on their path to securing final stamps of approval. Will their luck hold after things took an unexpected turn with a recent court decision? The ruling has added fuel to the smoldering fire of opposition stemming from environmentalists’ beliefs that the fossil fuel duo will inflame climate change rather than help quench it.

The dust a recent court ruling kicked up has not yet settled as it put the oil and gas developments in hot water by throwing them under the proverbial bus if they failed to weigh in on the climate impact of burning the oil, spurring climate activists to resume legal battles against Shell’s Jackdaw in the North Sea and Equinor’s Rosebank located west of the Shetland Islands, said to be the largest untapped oil field in British waters.

With the government’s decision to stay out of the courtroom and the fight opponents of these projects are preparing to launch, uncertainty is brewing on the UK’s energy horizon. Some analysts argue that this move minimizes the North Sea duo’s ability to win the court case and continue the development to reach the production stage, putting Great Britain’s energy security at risk. Both the regulator, North Sea Transition Authority (NSTA), and the operators may still be in the game as no announcements have been made concerning their stand after the government took itself out of the equation.

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The Jackdaw field is located approximately 250 km east of Aberdeen, Scotland, and is adjacent to the UK/Norway median line. The project is designed to entail a not permanently attended wellhead platform, alongside subsea infrastructure, which will be tied back to Shell’s existing Shearwater gas hub.

The project is still expected to come online in 2025, and at peak production rates, could represent over 6% of projected UK North Sea gas production in the middle of this decade, with operational emissions of less than 1% of the whole UK basin, which is enough energy to heat 1.4 million homes. Peak production from the field is estimated at 40,000 barrels of oil equivalent per day.

On the other hand, Equinor and its partner, Ithaca Energy, are investing $3.8 billion in the Rosebank field, located around 130 kilometers northwest of Shetland and said to contain the largest undeveloped reserves in UK waters. With electrification, it is estimated that the Rosebank lifetime upstream CO2 intensity would decrease from 12 kg to about 3 kg CO2/boe.

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At its peak, Rosebank could produce 69,000 barrels of oil or 9,000 tons per day, which is equivalent to 8% of the UK’s entire output between 2026 and 2030. Legal trouble is looming over the UK government and Rosebank over climate concerns, as environmental groups have decided to take the government to court over the approval of the field’s development.

The Rosebank project will produce over 21 mmscf of natural gas every day, the equivalent of the daily use of Aberdeen City. This development is expected to lead to £8.1 billion (over $9.8 billion) of total direct investment, of which 78% is likely to be invested in UK-based businesses. 

While the UK government has already been on the horns of a dilemma about greenlighting new hydrocarbon exploration and production endeavors, the court’s decision served to incorporate new environmental layers that need to be peeled away before a decision is reached.

Climate campaigners scored a huge legal win in May 2024 when the High Court ruled the UK government’s climate strategy was unlawful and ordered the next government to produce a new one. Despite these recent wins, activists underline that their fight to end the era of fossil fuels is not over, as there are more legal battles to be won to keep fossil fuels in the ground.

After a yearslong court saga, a legal challenge, brought on by local campaigner Sarah Finch on behalf of Weald Action Group and supported by Friends of the Earth, against Surrey County Council over its decision to grant planning permission for oil drilling at Horse Hill, has led to an unprecedented plot twist in the handling of lawsuits against fossil fuel projects, giving an advantage to those fighting for the climate in court.

Since the Supreme Court’s ruling emphasizes for the first time that emissions from burning oil and gas need to be taken into account when approving such projects, environmental activists and climate campaigners have hailed the decision to quash the planning permission for the Horse Hill project as a historic win for the climate. 

As the government made the decision not to challenge the judicial reviews brought against development consent for the Jackdaw and Rosebank offshore oil and gas fields in the North Sea, it explained that it took such a step to save the taxpayer money. It also underscored that the litigation did not signify the withdrawal of licenses for Jackdaw and Rosebank.

In the race to stave off climate catastrophe, environmentalists, using the campaign slogan #StopRosebank, see no room for new oil and gas production and neither does Oceana, an ocean conservation organization, which is taking the government to court, following the award of 31 new oil and gas licenses, over a third of which are believed to overlap with marine protected areas. This legal case got the backing of over 20 non-government organizations.

As the Labour government has been on the fence about new oil and gas licenses with some members openly calling for an end to new projects, the government has decided to mull over the ramifications of the court’s ruling and make new environmental guidance for oil and gas players in the hope of enabling stability in the sector to ensure supportive investment climate, safeguard jobs, boost economic growth, and reach climate targets during the energy transition era to a more sustainable future with the North Sea transforming itself into a clean energy hub.

According to the UK’s Department for Energy Security and Net Zero, the revamped environmental guidance is necessary in light of the Supreme Court ruling that has implications on the assessment of new development consents, requiring regulators to consider the impact of burning oil and gas, Scope 3 emissions, in the environmental impact assessment (EIA) for new projects.

This may be a bitter pill for the oil and gas industry to swallow, however, the government will likely raise the emission reduction bar for any future projects seeking approval but the new rules will probably also affect the ones under development or already up and running.

While this cross may be too much for some fossil fuel players to bear, pushing them to close their UK chapters and seek new hydrocarbon opportunities elsewhere around the world where the rules are less strict and the fiscal regime more appealing, Labour intends to stick to its guns for the time being as it has been elected on a mandate to deliver “an orderly and prosperous transition” in the North Sea that secures “current and future generations of good jobs,” and meets the UK’s legally-binding targets.

In an attempt to reassure the oil and gas industry about its intentions, the UK’s Department for Energy Security and Net Zero, emphasized: “The government recognises the proud history of the UK offshore industry and the brilliance of its workforce, particularly in Scotland and the Northeast of England, and the ongoing role of oil and gas in the country’s energy mix. Crucially, oil and gas production in the North Sea will be a key component of the UK energy landscape for decades to come as it transitions to our clean energy future in a way that protects jobs.

“The government believes that offshore workers will lead the world in the industries of the future. With its number one mission of growth and wealth creation, ministers’ sleeves are rolled up ready to support investment and projects that can deliver jobs, growth, and energy security, and drives towards the UK’s clean energy future. Since coming to office in July, there has been urgent action already taken toward the government’s clean energy mission.”

The government intends to act swiftly to enable decisions on oil and gas development consents. Before coming up with new guidance, it will engage with industry, workers, trade unions, and civil society to gain insights, provide clarity and certainty for the industry, and ensure a fair, orderly, and prosperous transition in the North Sea in line with Britain’s climate and legal obligations.

As part of plans to turn the UK into a green energy powerhouse, Great British Energy, which will be headquartered in Scotland, was launched by the Prime Minister and Energy Secretary last month, coming after the biggest-ever investment in offshore wind, ending the onshore wind ban, and consenting homegrown solar. All these steps were taken to move away from fossil fuels and forge ahead with new North Sea industries like carbon capture and storage (CCS) and hydrogen. 

Michael Shanks, UK’s Minister for Energy, underlined: “This government is committed to making Britain a clean energy superpower, helping to meet our first mission to kickstart economic growth. While we make that transition the oil and gas industry will play an important role in the economy for decades to come. As we support the North Sea’s clean energy future, this government is committed to protecting current and future generations of good jobs as we do so. 

“We were elected with a mandate to deliver stability, certainty and growth. Every action we take will be in pursuit of that. We will consult at pace on new guidance that takes into account the Supreme Court’s ruling on eenvironmental impact assessments, to enable the industry to plan, secure jobs, and invest in our economy.”

The British government intends to embark on consultations later this year regarding the implementation of its manifesto position on not issuing new oil and gas licenses to explore new fields. While the government will aim to conclude its consultation by spring 2025, it will work in partnership with operators in the meantime to navigate the implications for individual projects.

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In response to the government’s decision not to defend the two oil projects, #StopRosebank dubbed the move as “a massive win for everyone fighting to stop Rosebank and for a liveable future,” adding that the new government has made “the right decision not to waste time and money trying to defend the indefensible.”

The climate campaigners have acknowledged that the battle against the development of these giant North Sea projects is not over as Shell, Equinor, and the NSTA, have not revealed their cards yet, thus, their positions are unclear and they may decide to defend the case or drop it. Regardless of their decision, the legal challenge will move through the Scottish courts.

Moreover, #StopRosebnk believes that the government’s concession makes it even more likely that the decision to approve the field will be declared “unlawful” and need to be remade, giving the government a chance to make a new decision. Climate activists are hoping that Labour will stop these field developments for good.

“Not only would Rosebank bust UK climate targets, it is also a rip off: oil for export that would do nothing to lower bills or boost UK energy security. Yet, unbelievably, UK taxpayers would effectively have to cover almost all of the costs of developing it! The legal challenge against Rosebank is now a straight fight between a liveable future and oil and gas industry profits – and we’re more confident than ever that we’ll win,” stated #StopRosebank.

“Refusing to defend Rosebank is a big step in the right direction. Now, the UK government must stop Rosebank once and for all. It must also provide a plan for a fair and properly funded transition for oil and gas workers and the communities that depend on them.”

While environmental activists are optimistic about their chances of stopping the development of these fields for good, nothing is written in stone, thus, the current legal challenges may end up being another bump in the road to the development of these untapped oil and gas resources.

Unlike the UK government, which seems bent on giving up on fossil fuels and moving to renewables and other clean sources of power supply, Norway is embracing more oil and gas as hammered home by Equinor’s new investment plan up to 2035, which brings $5.7 – $6.6 billion into play each year to bolster the Norwegian oil and gas ecosystem.

The company’s plan for bankrolling further development of oil and gas in Norwegian waters came after the Norwegian Offshore Directorate (NOD) issued a warning about the risk of losing over $1.42 trillion (NOK 15 trillion) if the country renounced new projects and did nothing to step up its hydrocarbon exploration game and take advantage of emerging technology to up its production ante.

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