What is the meaning of licence extension for controversial Cambo project in UK?

Partners in the Cambo project off the UK, Shell and Siccar Point Energy, have received a two-year extension of licences containing the controversial Cambo field development. While the extension may give an impression that the project is moving forward, Shell emphasised there is no change to its position from late last year.

A spokesperson for Shell confirmed to Offshore Energy that the North Sea Transition Authority (NSTA) has awarded Siccar Point Energy and Shell UK an extension to the underlying licenses containing the Cambo field. The licences were due to expire on Thursday, 31 March 2022.

The Cambo oilfield project, led by Siccar Point in partnership with Shell, is located about 125km northwest of the Shetland Islands at a water depth of 1100m. Siccar Point is the operator with a 70 per cent interest and Shell holds the remaining 30 per cent.

While the fact that the licences have been extended may give an impression that the project is moving forward in some way, their extension is a standard practice done by the oil and gas regulator NSTA, which has recently changed its name to reflect its role in the energy transition.

The spokesperson for Shell also said: “At this time there is no change to our position of December 2021, but the extension to the licenses will allow time to evaluate all potential future options for the project.”

Offshore Energy has also reached out to Siccar Point for confirmation and more details about its plans. A spokesperson for the company confirmed the extension, adding it continues to work with its co-venturer Shell and the UK government to map out the next steps on Cambo.

As a reminder, the project development faced fierce opposition from environmentalists last year, especially in the wake of the COP26 summit in Glasgow and widespread discussions about whether the UK should continue developing new fossil fuels projects as it is working to become net-zero by 2050. In addition, Scotland’s First Minister, Nicola Sturgeon, last November expressed for the first time her belief that the Cambo oil project should not get the green light.

The increasing pressure over the project development coupled with pushback from parts of the government in December 2021 ended in Shell deciding not to progress the investment in the project, shedding doubt on its future.

In December 2021, Shell said: “Before taking investment decisions on any project we conduct detailed assessments to ensure the best returns for the business and our shareholders. After comprehensive screening of the proposed Cambo development, we have concluded the economic case for investment in this project is not strong enough at this time, as well as having the potential for delays.”

However, Shell emphasised that continued investment in oil and gas in the UK remains critical to the country’s energy security.

Days after Shell’s decision, Siccar Point also decided to suspend its development of the project.

Siccar Point then said that Cambo would help to reduce the volume of imports required, by delivering up to 170 million barrels of oil equivalent during its 25-year operational life. Cambo would also provide a further 53.5 billion cubic feet of gas – enough to power 1.5 million homes for a year.

The company believes hydrocarbons Cambo would produce are suitable for the UK and European market, helping to support domestic supply during the period that renewable energy is expected to scale to levels to meet UK energy demands.

Oddly enough, soon after the project was paused, the global security of energy supply became one of the biggest priorities for the European governments following Russia’s attack on Ukraine. While the U.S. has immediately moved to ban Russian fossil fuels, the UK has decided to phase out Russian oil imports by the end of the year, prompting calls for an increase in domestic oil and gas output much to the disapproval of environmental campaigners.

Now that Cambo licences have been extended, environmental campaigners have condemned the UK government’s decision, saying it merely delays the inevitable rejection of the field and the transition away from fossil fuels. The campaigners also emphasised that this decision does not mean that the Cambo field has been given the go-ahead for drilling.

Shell and Siccar Point have had years to develop the project but, even before the latest conundrum, the project’s final investment decision was postponed once before due to the Covid-19 pandemic.

Commenting on the extension, Friends of the Earth Scotland’s Climate and Energy Campaigner, Caroline Rance, said: “Two more years won’t make the project look any better in terms of its devastating climate impacts or the urgency of the transition away from fossil fuels.”

Rance added: “New fields approved today wouldn’t start producing for years, and would do absolutely nothing for people’s soaring energy bills. Any oil that these companies might extract in years to come will be theirs to sell to the highest international bidder, not reserved for the UK. The suggestion that increasing UK oil and gas production will protect consumers is simply false.”

The environmental organisation also called for the rejection of all new oil and gas projects and the scaling up of renewable energy.

On a related note, Siccar Point’s Cambo field is located close to another project which is supposed to be developed off the Shetland Islands, the Equinor-operated Rosebank project.

The operator is working to mature and improve the project following a recent front-end engineering design contract award. While Cambo was supposed to be developed with a cylindrical FPSO of a Sevan design, Equinor is looking into using an existing FPSO for the Rosebank project.