Multi-billion investment on the horizon, as UK greenlights giant Rosebank oil field

Following the delay in the decision on whether to approve or not one of the largest undeveloped oil fields in the UK, the North Sea Transition Authority (NSTA) has now given its blessing for the development of the controversial Rosebank field on the UK Continental Shelf (UKCS).

Rosebank, one of the previously delayed energy projects, located West of Shetland, ran into additional obstacles in the summer, as the decision regarding the approval of the project, previously expected in July 2023, was put on hold until parliament recess was over.

Located about 130 kilometers off the coast of the Shetland Islands in the UK, the Rosebank oil and gas field is estimated to contain 300 million bbl of potentially recoverable reserves. Equinor previously confirmed to Offshore Energy that the final investment decision (FID) was slated for 3Q 2023.

It seems that two birds have now been killed with one stone, as the NSTA granted its consent for the development of the Rosebank field on September 27, 2023, while Equinor and its partner, Ithaca Energy, took the final investment decision to progress Phase 1 of the development, investing $3.8 billion in the project.

Gilad Myerson, Executive Chairman of Ithaca Energy, commented: “We are delighted to announce the decision to move forward with the Rosebank development alongside Equinor. Rosebank stands as the largest undeveloped field in the UK, and with the receipt of development consent from the NSTA, we are now poised to embark on a journey that will not only provide critically important domestic energy but also ignite substantial economic impact. The Rosebank project will create thousands of jobs and contribute significantly to securing the UK’s energy needs for many years to come.”

According to Ithaca, Phase 1 is targeting an estimated 245 million barrels of oil and the field will be developed with subsea wells tied back to a redeployed floating production storage and offloading (FPSO) vessel, with first production expected in 2026-2027. The Rosebank field will produce in excess of 21 mmscf of natural gas every day, the equivalent to the daily use of Aberdeen City.

An NSTA spokesperson said: “We have today approved the Rosebank field development plan which allows the owners to proceed with their project. The FDP is awarded in accordance with our published guidance and taking net-zero considerations into account throughout the project’s lifecycle.”

The partners in the Rosebank development highlight that this project has been optimized to reduce carbon emissions, in line with the North Sea Transition Deal, with the FPSO designed to be electrification-ready. Ithaca Energy and Equinor continue to collaborate with government and industry stakeholders to pursue a regional solution for power from shore to Rosebank and nearby fields with the objective of minimizing carbon emissions from production.

Geir Tungesvik, Equinor’s Executive Vice President Projects, Drilling and Procurement, pointed out: “Developing the Rosebank field will allow us to grow our position as a broad energy partner to the UK, while optimizing our oil and gas portfolio, and increasing energy supply in Europe. Rosebank provides an opportunity to develop a field within the UK Continental Shelf which will bring significant benefits to Scotland and the wider UK.”

Based on Equinor’s projections, the Rosebank development is expected to lead to £8.1 billion (currently over $9.8 billion) of total direct investment, of which 78% is likely to be invested in UK-based businesses. The project is expected to support around 1,600 jobs during the height of the construction phase. It will also continue to support approximately 450 UK-based jobs during the lifetime of the field.

Multiple contracts have already been awarded in relation to the Rosebank development. In line with this, TechnipFMC has been awarded an integrated engineering, procurement, construction, and installation (iEPCI™) contract for subsea production systems, umbilicals, risers, and flowlines with an estimated value of $500 million derived locally. TechnipFMC has estimated that more than half of the contract value will be generated from local activities across the UK, with a large portion in Scotland.

Furthermore, project management and engineering activities will be performed mainly from Aberdeen and tree systems will be manufactured in Dunfermline. The umbilicals will be produced in Newcastle, pipelines will be fabricated in Evanton and the main vessel mobilization site will also be in the UK. In addition, several other fabrication sites in the UK will contribute to the project.

Arne Gürtner, Senior Vice President Upstream at Equinor in the UK, emphasized: “We know that the world needs to transition to new, cleaner energy systems and our broad energy investments into the UK support this. And while we do this there is going to be a continued need for oil and gas, which currently meets 76% of the UK’s energy needs. Our decision to progress the Rosebank development is the result of work and collaboration by our employees, partners, government, regulators, and other stakeholders to ensure that this development is able to help meet this ongoing need, with the lowest carbon footprint possible.”

Odjfell Drilling has been awarded a rig contract, with an estimated value of $328 million including options, integrated services, and other modifications. Due to this, the Deepsea Atlantic rig is scheduled to start a seven-well drilling campaign in the second quarter of 2025, and an additional four single-well options are included.

Moreover, Altera has been awarded a bareboat charter and an operations and maintenance contract related to the FPSO Petrojarl Knarr, which is set to be deployed for Rosebank on a firm contract for nine years, with options up to a total of 25 years. With electrification, it is estimated that the Rosebank lifetime upstream CO₂ intensity would decrease from 12 kg to about 3 kg CO₂/boe.

Alan Bruce, Chief Executive Officer of Ithaca Energy, remarked: “We look forward to expanding our working partnership with Equinor to deliver one of the lowest emission-intensity assets in the UK. The Rosebank development represents a significant investment in the UK and Scotland, and we are delighted to be supporting our local supply chain.”

The UK’s trade body for the offshore energy sector, Offshore Energies UK (OEUK), has hailed the UK government’s decision to approve the new Rosebank oil and gas field, as a way to boost jobs, grow the economy, cut emissions, and secure supplies. At its peak, Rosebank could produce 69,000 barrels of oil or 9,000 tonnes per day, which is equivalent to 8% of the UK’s entire output between 2026 and 2030.

David Whitehouse, OEUK’s CEO, stated: “This is good news for our jobs, our economy, and our secure energy future. By promoting homegrown production, we avoid costlier, higher carbon imports while making more reliable supplies of energy in the UK, for the UK. We need more projects like Rosebank if we are serious about delivering a homegrown UK energy future. We have around 283 fields in the North Sea, but over 180 of those will stop producing within the next decade.

“If these are not replaced, we will import 80% of the oil and gas the UK will need at a higher cost to the consumer, our economy, and ultimately the climate. Imported energy cost the UK £117 bn last year. That’s a lot of money spent supporting the economies of other producing countries. Surely, with our industry committed to eliminating emissions, it makes sense to prioritize our own domestic production and jobs.”

While OEUK sees the approval of Rosebank as “an important milestone” in the UK’s energy reform, it claims that more projects will be needed to manage reliance on imported oil and gas as UK production declines, because over its lifetime the field will only meet eight months’ worth of UK demand.

“This is a boost to UK offshore energy supply chain companies. The bulk of companies investing in opportunities like floating offshore wind, hydrogen, carbon capture and storage, and decarbonizing our economy require the cash flow from a stable and predictable oil and gas business to fund these opportunities,” added Whitehouse.

OEUK’s recent economic report found that £100 billion of investment in offshore energy by 2030 was still awaiting approval. Offshore Energies UK underlines that a recent offshore wind auction attracted no bidders because businesses need to feel more confident in the UK’s long-term energy policies to sign off.

“Our latest Economic Report found £35 billion could be spent in the next decade on offshore oil and gas projects, but businesses need renewed certainty to sign off. This announcement is a step in the right direction, but more needs to be done to secure the private investment that underpins the jobs for our homegrown energy future,” concluded Whitehouse.

Environmental activities and climate campaigners have done their utmost to put the kibosh on the development of the Rosebank field. Some politicians, like the Scottish Greens, urged the UK government to put an end to plans to develop the field on climate grounds.

After hearing about the project’s approval, Greenpeace UK said the development of Rosebank was “a disaster for the climate and for people’s energy bills.” The group also claims that “Rishi Sunak has proven once and for all that he puts the profits of oil companies above everyday people.”

Many are not happy with the government’s decision to approve Rosebank. This includes Jeremy Corbyn, MP for Islington North, who outlined: “The UK government’s decision to approve Rosebank displays shameful disregard for future generations. Some want to ‘give investors certainty,’ but how much certainty will investors have on a burning planet? Stop Rosebank and invest in renewables instead!”

While agreeing with Caroline Lucas’ views about Rosebank, Nicola Sturgeon, MSP for Glasgow Southside and former First Minister of Scotland, said: “By consuming scarce resources that could be going to renewables, it risks slowing the green transition and the jobs that come from it. That’s not in interests of those who work in oil & gas – they need that transition to happen at pace.”