Future of North Sea oil in doubt as Shell pulls the plug on Cambo

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And the Government has pledged to continue to support the oil and gas industry, as long as it also slashes emissions from production and invests in green energy such as hydrogen and carbon capture. 

Yet as the tensions over Cambo rose in the run-up to the UK hosting the international climate change conference Cop26 in November, ministers stopped short of a full-throttled defence. Boris Johnson told Cop26 that we want to “move beyond hydrocarbons completely in the UK, and do it as fast as possible”.  

Senior figures at Shell are understood to have become frustrated by the UK Government’s unwillingness to give Cambo public support. A Whitehall source, however, accused Shell of bowing to a “vocal minority” of activists who have blocked the projects.

In Scotland, meanwhile, first minister, Nicola Sturgeon, has taken an increasingly strident stance against fossil fuels amid her power-sharing deal with the pro-independence Green Party. 

Over the summer she demanded the UK Government review approved oil and gas licences while last month she said Cambo should “not get the green light”. Political signals from Scotland are also thought to have been important in Shell’s decision.

In October, Shell was further disappointed when UK regulators declined to approve its major Jackdaw development in the North Sea. “They can do these projects anywhere in the world – why would they do it somewhere where they are going to spend all of their time fighting?,” said an industry source. Shell is revising plans to get approval.

Whether the giant’s recent move signals a wider caution towards the North Sea is harder to predict. One industry executive said it was “absolutely” still a great place to invest. Other sources echoed Sir Ian Wood’s warning about creating a hostile environment, stressing this placed investment in cleaner energy at risk, too. 

“It’s either an investable destination or not and you make that decision based on stability of fiscal and regulatory policy,” said one industry source. 

As it all unfolds, Kwarteng has a lot to think about.

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