Scottish leader urges UK PM to 'reassess' Cambo oil project license

Scotland's First Minister Nicola Sturgeon urged UK Prime Minister Boris Johnson Aug. 12 to "reassess" the licensing of Cambo, the country's largest oil field project awaiting approval.

The move — stopping short of calling for the project to be scrapped — adds to a war of words over the 800 million-barrel field in the West of Shetland area, which is due for imminent approval under the operatorship of independent Siccar Point Energy and its partner Shell.

Cambo is viewed as potentially the next major boost for West of Shetland oil production as output from earlier projects such as Clair and Schiehallion starts to wane. Like those fields, Cambo produces heavier crude than benchmark North Sea grades such as Brent and Forties, and has an API gravity of less than 25.

The project puts the UK government in a difficult position as it prepares to host the COP26 climate talks in Glasgow in November. It has already suspended new oil and gas field licensing pending a reassessment, but has said further licensing could take place and that oil and gas remain important to energy security. Johnson has said existing licenses cannot be torn up.

Sturgeon, in her letter seen by Platts, highlighted an Aug. 9 warning by the UN Intergovernmental Panel on Climate Change that limiting global warning to 1.5 C or even 2 C could be beyond reach without "immediate, rapid and large-scale reductions" in greenhouse gas emissions.

"I am asking that the UK Government now commits to significantly enhancing the climate conditionality associated with offshore oil and gas production," she said. "I am also asking that the UK government agrees to reassess licenses already issued but where field development has not yet commenced. That would include the proposed Cambo development."

"Such licenses, some of them issued many years ago, should be reassessed in light of the severity of the climate emergency we now face, and against a robust compatibility checkpoint that is fully aligned with our climate change targets and obligations. The Scottish government would be happy to engage further about exactly what this process should involve."

Political equation

The leader of the UK's opposition Labour party, Keir Starmer, has already said Cambo should not go ahead on climate grounds

Sturgeon's stance is not uncomplicated, given the economic boost associated with a project like Cambo. She noted the potential for jobs from energy transition projects, saying: "The knowledge and experience of the oil and gas sector and its supply chain should be harnessed in the development of essential low-carbon technologies, such as the production of hydrogen and carbon capture, utilization and storage."

S&P Global Platts Analytics expects UK oil production to fall more than 40% in the next decade, from around 930,000 b/d this year.

Responding to the letter, the government's Department for Business, Energy & Industrial Strategy told Platts: "The UK is the only G7 country to have agreed a landmark deal to support the oil and gas industry's transition to green energy by 2050 while at the same time supporting 40,000 jobs. Even though demand for fossil fuels is falling and we continue to break records on our use of renewable energy, the advice of the independent Climate Change Committee is that we will continue to need oil and gas in the coming years as it is still vital to the production of many everyday essentials like medicines."

The government is already designing a "climate compatibility checkpoint" for future licenses, a spokesperson for the department added.

Environmentalists have threatened to challenge the project in the courts, following a recent court ruling against Shell in the Netherlands ordering it to speed up its emissions reductions.

Siccar Point Energy did not comment on the letter. Industry group Oil & Gas UK said such projects were compatible with the UK's net-zero climate goals in meeting residual demand for hydrocarbons as older fields are decommissioned.

"Our industry is committed to the Scottish and UK net-zero targets," OGUK energy policy manager Will Webster said. "Overall such new investment will be more than offset by assets entering decommissioning."

"We have a robust regulatory system ... through the legally binding changes made in February 2021 to the Oil and Gas Authority's responsibilities, and which are already a requirement on the entire industry."