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A court has revoked permission to exploit the UK’s largest undeveloped oil reserve along with a second North Sea project in the latest blow to the country’s rapidly declining fossil fuel extraction industry.
The ruling by Scotland’s top civil court on Thursday overturns licences granted to Norway’s Equinor and the UK’s Ithaca Energy to exploit the vast Rosebank field west of Shetland, thought to contain 500mn barrels of oil.
Lord Ericht in the Court of Session also ruled that Shell could not produce gas at the Jackdaw field unless a new licence was granted.
Both sides had agreed the original permissions had been issued unlawfully given a subsequent UK Supreme Court ruling in a separate case that said the impact of burning fossil fuels must be considered when regulators issue licences.
But the developers, who have already spent a combined £3bn on the projects, argued they should still be allowed to go ahead given how far the schemes had progressed.
“The public interest in authorities acting lawfully and the private interest of members of the public in climate change outweigh the private interest of the developers,” Lord Ericht decided.
Equinor, Ithaca and Shell will be allowed to continue work developing the fields but not extract oil and gas while the North Sea Transition Authority considers their renewed applications for licences.
The NSTA, which granted licences in 2022 for Jackdaw and in 2023 for Rosebank, would this time have to consider the effect of “downstream” emissions from use of the oil and gas produced.
The Department for Energy Security and Net Zero is preparing to issue guidance “as soon as possible” on how the environmental impact of oil and gas production should be considered in licence applications.
Renewed applications for the Rosebank and Jackdaw field will be considered under the new system.
“Our priority is to deliver a fair, orderly and prosperous transition in the North Sea in line with our climate and legal obligations,” it said.
Labour, in its election manifesto, pledged it would not grant new exploration licences but also said it would not block existing developments from going ahead.
The licences in the Rosebank and Jackdaw case are “consents to operate”, which are different from exploration licences.
The projects had been challenged by environment campaigners Greenpeace and Uplift because downstream emissions were not factored into the NSTA’s original decision. In August, the newly elected Labour government decided not to oppose the campaigners’ legal challenge.
Philip Evans, senior campaigner at Greenpeace UK, called the legal case a “historic win”.
Tessa Khan, executive director of Uplift, said the ruling was a “significant win” which meant that Rosebank could not go ahead without accounting for its “enormous climate harm”.
The ruling stems from last year’s UK Supreme Court decision in the “Finch” case, involving a potential oil well in Surrey.
The Finch ruling said it was unlawful for regulators to leave emissions from the eventual use of oil and gas out of environmental impact assessments.
Regulators had specifically told the Rosebank and Jackdaw developers not to take account of those emissions in their submissions.
Both Equinor — lead developer of Rosebank — and Shell welcomed the court’s decision to let them go ahead with developing the fields for now.
Equinor said: “We will continue to work closely with the Regulators and Department for Energy Security and Net Zero (DESNZ) to progress the Rosebank project.”
Shell said: “Today’s ruling rightly allows work to progress on this nationally important energy project while new consents are sought.”
Production from the North Sea has declined in recent years, with investors complaining about costs including “windfall” taxes on their profits levied after energy prices spiked in 2022 with Russia’s full-scale invasion of Ukraine.
