After receiving approval from regulators, Shell will develop the largest North Sea gas project in years as the Government scrambles for domestic energy supplies.
Jackdaw, a project is expected to produce approximately 6.5pc of Britain’s gas output. Shell plans to begin production in the second half of 2025.
Shell’s plans to develop the field were rejected by environmental regulators in the beginning, but they were approved after being revised.
While the Government is keen to reduce fossil fuel use over the long term, it is also under pressure from the domestic market to increase supplies following the Russian invasion of Ukraine which caused turmoil in the international oil and gas markets.
Kwasi Kwarteng (the Business Secretary) tweeted Wednesday: “Jackdaw Gas Field – originally licensed 1970 – has received final regulatory approval.”
“We are turbocharging nuclear and renewables, but we also have to be realistic about our energy requirements now. We need to source more gas from British waters in order to ensure energy security.
Climate campaigners, however, criticized the decision. Greenpeace claimed that the government’s approval was “desperate” and “destructive”, and it showed that there was no long-term plan. It also stated that they were considering legal action to stop this project.
Jackdaw’s approval comes one week after the Government dismantled the oil and gas industry by imposing a windfall tax on North Sea profits in order to help households with high energy bills.
In April, a 54% increase in energy bills was caused by soaring wholesale gas prices. They are expected to rise again in October at an average of 42% to £2,800 annually.
Shell has criticized the levy, stating that it creates uncertainty about the investment climate in North Sea oil and natural gas over the next years.
Shell’s Jackdaw investment decision is thought to have been made before the windfall tax and will not be affected. Shell stated earlier this year that it will invest £20bn to £25bn in UK’s energy system over the next ten years.
A Shell spokesperson welcomed Jackdaw’s consent. The Shell spokesperson said that Jackdaw was “responsibly produced” and will play an important role in the UK’s transition towards net zero. It also stated: “Responsibly Produced, Local Gas Production plays an essential part in the UK’s Transition to Net Zero, will support thousands, and forms part Shell UK’s broader intention to invest £20bn-£25bn in the UK, with 75pc destined for low- and zero-carbon products and services.
“However, we have stated repeatedly that this can only be achieved with stable fiscal policies and we continue looking to the government to provide those assurances.”
Jackdaw’s approval could encourage Shell to reconsider its involvement with the Cambo oil field west Shetland.
The company pulled out from the planned field last spring citing a weak economic case and rising public and political opposition in the lead up to the Cop26 international conference on climate change in Glasgow.
Over the past few months, the Government has been more friendly towards North Sea production, with oil and gas bosses being invited to Downing Street in March to encourage increased production.
The UK will ban Russian oil imports by the end of the year. Although the UK does not receive much gas directly from Russia, there are concerns that the UK could see a substantial increase in prices if Russia continues its war against Ukraine.
Jackdaw holds reserves of between 120m to 250m barrels of oil equivalent. However, it will not be able to ease winter pressures due to its development timeline.
A spokesperson for the Government stated that “Sourcing natural gas locally in the North Sea reduces our dependence on foreign imports and leaves us with half the carbon footprint as imported gas.”
“There will be an ongoing demand for oil over the next years as we transition into a cleaner, less-carbon energy. This ensures that we protect British energy security, jobs and industries without becoming more dependent upon foreign imports.
The oil industry’s environmental regulator concluded that the project would not have any significant impact on the environment
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