Introduction: Britain gives go-ahead for Equinor to develop Rosebank oil field
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Rosebank, the largest untapped oilfield in UK waters, has been approved by the UK government, sparking outrage from environmental campaigners.
Britain has given the go-ahead for Oslo-listed energy company Equinor to develop the oil and gas field in the North Sea, northwest of the Shetland islands.
Equinor, which holds a majority stake in Rosebank, will develop it with its British partner Ithaca Energy and invest $3.8bn. The field is expected to produce at least 300m, possibly up to 500m barrels of oil and is three times bigger than the controversial Cambo field that was put on hold more than a year ago.
A spokesman for the North Sea Transition Authority said:
We have today approved the Rosebank Field Development Plan (FDP) 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.
Rosebank is one of the most controversial energy projects, with hundreds of climate scientists and academics and more than 200 organisations from the Women’s Institute to Oxfam joining tens of thousands of people across the UK in opposition. Environmentalists argue that it contravenes Britain’s plan for a net zero economy.
Philip Evans, Greenpeace UK’s climate campaigner, said:
Rishi Sunak has proven once and for all that he puts the profits of oil companies above everyday people. We know that relying on fossil fuels is terrible for our energy security, the cost of living, and the climate. Our sky-high bills and recent extreme weather have shown us that.
The ugly truth is that Sunak is pandering to vested interests, demonstrating the stranglehold the fossil fuel lobby has on government decision making. And it’s bill payers and the climate that will suffer because of it. Why else would he make such a reckless decision?
This decision is nothing but carte blanche to fossil fuel companies to ruin the climate, punish bill payers, and siphon off obscene profits. We already have the solutions to cut bills, increase energy security and cut emissions, but the government ignores them in favour of handouts to corporations at the expense of the rest of us.
The news came as oil prices climbed by $1 a barrel, as markets worry about tight supplies heading into the winter and higher interest rates.
The oil producers’ cartel Opec, led by Saudi Arabia, and allies such as Russia have cut production and forecast supply shortfalls.
Brent crude rose more than 1% to $94.98 a barrel while US light crude is up 1.1% at $91.4 a barrel.
There are also concerns that higher interest rates could slow economic growth and reduce demand for oil. The US Federal Reserve has signalled that borrowing costs may need to be stay higher for longer than expected.
Separately, Hui Ka Yan, the billionaire chairman of the stricken property developer Evergrande, has been placed under police control, Bloomberg reported.
Hui was taken away by Chinese police earlier this month and is being monitored at a designated location.
It’s not clear why Hui is under so-called residential surveillance, a type of police action that falls short of formal detention or arrest and doesn’t mean Hui will be charged with a crime, Bloomberg said. This means he is unable to leave the location, meet or communicate with others without approval. Passports and identification cards must be handed to police but no longer than six months, according to the law.
Evergrande, the world’s most indebted property developer, is at the centre of a crisis in China’s property sector. A wave of defaults in the property sector has dragged down growth in China’s economy.
The Agenda
Key events
Ithaca Energy, the British oil and gas firm, confirmed this morning that together with Equinor it will invest $3.8bn in the Rosebank oil field. Ithaca owns a 20% stake in Rosebank while Equinor, the operator of the field, owns the rest.
Gilad Myerson, executive chairman at Ithaca Energy, said:
Rosebank stands as the largest undeveloped field in the UK, and with the receipt of development consent from the North Sea Transition Authority, 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.
Rosebank, which is 130km north-west of Shetland, is estimated to produce around 300m barrels of oil from the first two phases of the project (245m during phase 1). It is expected to lead to £8.1bn of total direct investment and support 1,600 jobs during the height of the construction phase, and support 450 UK-based jobs during the lifetime of the field, Ithaca said.
Project management and engineering activities will be performed mainly from Aberdeen and tree systems will be manufactured in Dunfermline. Umbilicals will be produced in Newcastle, pipelines will be fabricated in Evanton and the main vessel mobilisation site will also be in the UK. In addition, several other fabrication sites in the UK will contribute to the project.
Alan Bruce, the Ithaca chief executive, said:
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.
You can read the full announcement here.
H&M blames hot weather for poor September sales
Swedish clothing giant H&M has blamed unusually hot weather across Europe for poor sales in September, saying this disrupted the start of the autumn shopping season.
H&M, the world’s second-biggest fashion retailer, said September sales will be down 10% year on year, measured in local currencies. By contrast, its biggest rival, Spain’s Inditex which owns the Zara chain and other brands, reported a 14% rise in sales between 1 August and 11 September.
Vera Diehl, portfolio manager at Union Investment, which holds shares in both H&M and Inditex, told Reuters:
If the sales at your competitor basically go up by 14% with the same weather, that tells you something, to my mind.
However, H&M’s profits in the June to August quarter jumped to 4.74bn kronor from 902m a year earlier. The retailer stuck to its goal of increasing its operating margin to 10% next year (from 8% in the quarter and 3% last year) and said its cost-cutting programme was continuing “at full speed”.
H&M shares rose nearly 4% in early trading.
RBC analyst Richard Chamberlain said:
We believe H&M is very much in ‘trading sales for profits’ mode which is leading to margin improvement but some pressure on volumes. It appears to be losing some like-for-like share in major markets.
Back to the Rosebank oil field approval. Jess Ralston, energy analyst at the Energy and Climate Intelligence Unit, a non-profit group, said:
A week after a swathe of net zero U-turns and a few days after abandoning the expert Energy Efficiency Taskforce, the prime minister has shown that he’d rather give tax breaks to oil companies than lower energy bills. Taxpayers will fork out around £4bn to the developers of the oil field, money that could have insulated millions of homes with many set to be colder and poorer this winter.
To make matters worse, Rosebank oil will mostly be exported and then sold back to us at whatever price the oil companies can get. So it won’t help one bit with energy independence or gas bills, despite the government’s rhetoric. New renewables could help, but Treasury rules meant that no new wind power was secured at the latest renewable auction.
What does this mean for today’s young and future generations? Inheriting the huge costs of decommissioning oil and gas fields and ever more emissions that are driving climate change.
Labour mayors urge Sunak not to scrap, delay or scale back HS2
Five Labour mayors have urged Rishi Sunak not to scrap, delay or scale back HS2 as it would “leave swathes of the north with Victorian transport infrastructure that is unfit for purpose”.
Sadiq Khan, Andy Burnham, Tracy Brabin, Oliver Coppard and Steve Rotheram say they have been “inundated” with concerns from constituents about the potential “economic damage that will result from any decision not to proceed with HS2 and Northern Powerhouse Rail (NPR) in full”.
The regional mayors issued a shared statement to express dismay at the prospect of the UK government scrapping the rail project’s northern leg, ahead of a collective meeting on Wednesday.
The cabinet minister Lucy Frazer, when asked if they would listen to the mayors’ plea not to cut the rail project further, said the prime minister and chancellor “listen to a wide variety of voices”.
The ethical fashion brand People Tree is putting its UK business into liquidation with debts of more than £8.5m including money owed to suppliers, customers and most of its British workforce.
Founded by the former wife and husband team Safia and James Minney, People Tree’s celebrity following included the film star Emma Watson and the model Jo Wood. It became an influential voice in UK fashion, using organic materials and campaigning for better treatment of garment workers around the world.
In other news…
Scrapping inheritance tax would cost the government almost £15bn a year in lost revenue by 2032, according to analysis by the Institute for Fiscal Studies that follows calls from Tory MPs for the main tax on inherited wealth to be abolished.
The thinktank said the latest figures from HMRC showed fewer than 4% of estates paid inheritance tax (IHT) in 2020–21, but the rapid growth in wealth among older individuals meant this number was set to rise to more than 7% over the next decade.
While London has the most estates liable to pay the tax, hotspots across Sussex, the Cotswolds and around Birmingham will have the greatest number per 100,000 residences.
Dr Paul Balcombe, senior lecturer in chemical engineering and renewable energy at Queen Mary University of London, said:
Signalling the expansion of North Sea oil and gas won’t make energy cheaper for us and will make it more difficult to transition to net zero. Together with the announcements of the rollback of marquee policies relating to petrol/diesel cars, energy efficiency improvements in homes, and phasing out boilers for home heating, this is a rather comprehensive dismantling of the policy measures in place to get to the next deeper phase of decarbonisation.
On the prime minister’s net zero policy changes last week, he said:
The UK Committee on Climate Change has previously warned that we are not on track for our interim decarbonisation targets, and delaying further will inevitably remove Britain from the forefront of the global decarbonisation drive. The rollback on policy implementation will inevitably make deep decarbonisation in 2030/2040 much more expensive to the government and to the public.
Ithaca Energy shares jump 8%
Shares in Ithaca Energy, which will partner with Norway’s Equinor to develop the huge Rosebank oil field, 80 miles west of the Shetland islands, have jumped more than 8% on news of the approval of the controversial project.
The shares are the top riser on the FTSE 250 in London.
Susannah Streeter, head of money and markets at Hargreaves Lansdown, said:
The waiting game is over and with approval now granted by the UK government for the exploitation of Rosebank, Ithaca Energy investors have cheered at the news, with shares rising by more than 8% in early trade. The company and its giant Norwegian partner Equinor have announced they have taken the final investment decision to progress phase 1 of the development on the UK continental shelf, 80 miles west of Shetland.
Ithaca Energy has been on a rollercoaster ride since its launch onto the London market, weighed down partly by the windfall tax. It said the energy profits levy forced it to write down its assets by £58m. So, the approval marks a ray of light for the company, and it is ploughing on with its plans.
The decision will undoubtably allay some energy security concerns, given that the partnership estimates that 245m barrels of oil could be produced in phase 1 on the project, but it pushes the UK down a notch in terms of its net zero leadership. Even though the regulator has said that these considerations have been taken into account, and the companies have stressed that electrification of operations will reduce emissions, it muddies the playing field again when it comes to government support for the green transition. The decision, coming so swiftly after the Sunak administration pushed back the ban on sales of new petrol and diesel cars to 2035, leads to more uncertainty for companies and investors focused on cleaner energy solutions.
The secretary of state for Scotland, Alister Jack, said the North Sea has a “huge role to play” in safeguarding Britain’s energy security on its way to net zero.
It’s great news that the regulator has given Rosebank the green light. The North Sea has a huge role to play in ensuring the UK’s energy security while we transition to net zero. It’s really important that we maximise our domestic oil and gas reserves, which mean lower emissions than imports, while reducing any reliance on hostile states. Rosebank will play a big role in that, as well as growing our economy and providing skilled jobs in Scotland for generations to come.
Here is our full story on the approval of the Rosebank oil field:
And our story on the billionaire founder and chairman of the troubled Chinese property developer Evergrande being put under police control, according to Bloomberg News:
“The folly off this decision is mind-boggling,” said Hugo Tagholm, leading ocean campaigner and director of Oceana UK. He explained:
Extreme marine heatwaves, government-sanctioned overfishing, and rampant pollution are ripping the heart out of UK seas. It is against this backdrop that the government has announced it is approving the Rosebank oilfield. The folly of this decision is staggering. Not only will this spew vast amounts of CO2 into the atmosphere, hastening a climate breakdown that will decimate ocean wildlife and cost countless lives, it will lock us into a dead-end industry that will leave workers stranded and the UK economy lagging.
Damage from drilling and pipelines will destroy extraordinary deep sea sponge communities, ancient cold-water corals and more. A toxic cocktail of pollutants including neurotoxins, microplastic and, of course, oil itself will blight our internationally important marine wildlife, from seabirds to seals.
To protect our ocean, stabilise our climate, lower bills and improve energy security we need a just transition to renewable energy – starting with an end to new offshore drilling.
🚨Rosebank oilfield has been approved🚨
The folly of this decision is mind boggling🤯 It will trash our climate & threaten our seas.
But this is not the end. We will fight this
🧑🤝🧑On the streets
⚖️In the courts
🌊On the beachesWho’s with us?✊https://t.co/0zQBeYQ5bv
— Oceana UK (@OceanaUK) September 27, 2023
UK energy secretary: ‘we must be pragmatic’
The energy secretary Claire Coutinho said “we must be pragmatic”:
We are a world leader at reducing carbon emissions but as much as we will be ambitious, we must be pragmatic that is why I support the @NSTAuthority’s decision to approve Rosebank today.
— Claire Coutinho MP (@ClaireCoutinho) September 27, 2023
Keir Starmer’s approach will lead to higher emissions and fewer British jobs. Labour would leave us worse off and threaten our ability to keep the lights on.
— Claire Coutinho MP (@ClaireCoutinho) September 27, 2023
We will not play politics with our energy security. Even the independent Climate Change Committee has said that in 2050, we will need oil and gas for a quarter of our energy.
— Claire Coutinho MP (@ClaireCoutinho) September 27, 2023
UK government welcomes Equinor’s £8.1bn investment
The government has welcomed the regulator’s decision to to approve the Rosebank project, saying it will boost the UK’s energy security and economy with a direct investment of £8.1bn from the Norwegian oil and gas group Equinor.
Some £6.3bn of this is likely to be invested in UK-based businesses. Equinor estimates that at its peak the field will be producing 69,000 barrels of oil and 44 million cubic feet of gas per day.
The government defended its decision by saying:
New projects like Rosebank are expected to be significantly less emissions intensive than previous developments, as they are more efficient and are developed with measures to mitigate emissions. Even when we’ve reached net zero in 2050, the climate change committee say that a quarter of our energy needs will come from oil and gas, but the choice is between it coming from hostile states rather than from the supplies we have here at home.
The oil and gas industry adds £17bn annually to the economy, supports around 200,000 jobs, and will provide around £50bn in tax revenue over the next five years, which can be used to support the shift to cleaner forms of energy.
You can read the full government statement here.
Equinor is expected to get a tax break of $3.75bn to develop the oilfield. Simon Francis, coordinator of the End Fuel Poverty Coalition, said:
Hidden in the small print of the deal is that this project can only go ahead thanks to a massive tax break the government is giving to international oil and gas giant Equinor.
Households struggling with their energy bills will be shocked that the new energy secretary has chosen to hand a multi-billion pound tax break to this Norwegian firm, rather than help people in the UK suffering in fuel poverty.
This sum alone could have provided much needed additional support to help disabled households, those living off the gas grid and the elderly.
The government’s major drive to keep the country hooked on fossil fuels will be for little reward. Figures show that more North Sea production will only give us an extra year of domestic gas, which will be charged to struggling households at global market prices.
This is a political choice and households will remember this decision at the general election.
Permission to develop the Rosebank oilfield comes a week after the prime minister, Rishi Sunak, performed a major U-turn on the government’s climate commitments, including pushing back the deadline for selling new petrol and diesel cars and the phasing out of gas boilers.
Sunak has said he remains “absolutely unequivocal” about sticking to the commitment to reach net zero carbon emissions by 2050 but added that he wanted to take a “more pragmatic, proportionate and realistic approach”.
Green party co-leader: ‘greatest act of environmental vandalism in my lifetime’
“The greatest act of environmental vandalism in my lifetime” is how Caroline Lucas, co-leader of the Green party and MP for Brighton Pavilion, described the government’s decision to approve the Rosebank oilfield. She tweeted:
BREAKING – #Rosebank oilfield just given go-ahead – the greatest act of environmental vandalism in my lifetime, causing emissions equal to 28 lowest income countries, busting #climate targets & doing nothing for energy security since vast majority is for export #climatecriminals
— Caroline Lucas (@CarolineLucas) September 27, 2023
This is morally obscene. It won’t improve energy security or lower bills – but it will shatter our climate commitments & demolish global leadership. Govt is complicit in this climate crime – as is Labour unless they pledge to do all possible to revoke it. https://t.co/aqGCKZQBwM
— Caroline Lucas (@CarolineLucas) September 27, 2023
Tessa Khan, a climate lawyer and executive director of Uplift, which helped coordinate the Stop Rosebank campaign, said:
Rosebank will do nothing to lower fuel bills or boost UK energy security. Most of this oil will be shipped abroad and then sold back to us at whatever price makes the oil and gas industry the most profit.
People in the UK overwhelmingly support moving to cheaper, cleaner renewable energy. This government should be prioritising making sure no pensioner, or family with small children is living in a cold, damp home this winter, not handing billions in tax breaks to obscenely wealthy foreign companies.
Rosebank is a rip off. It’s another case of the government allowing foreign companies to profit, while the costs are put on British people who worry about the world we are handing on to our children.
There are strong grounds to believe that the way this government has come to this decision is unlawful and we will see them in court if so. We shouldn’t have to fight this government for cheap, clean energy and a liveable climate, but we will.
Introduction: Britain gives go-ahead for Equinor to develop Rosebank oil field
Good morning, and welcome to our rolling coverage of business, the financial markets and the world economy.
Rosebank, the largest untapped oilfield in UK waters, has been approved by the UK government, sparking outrage from environmental campaigners.
Britain has given the go-ahead for Oslo-listed energy company Equinor to develop the oil and gas field in the North Sea, northwest of the Shetland islands.
Equinor, which holds a majority stake in Rosebank, will develop it with its British partner Ithaca Energy and invest $3.8bn. The field is expected to produce at least 300m, possibly up to 500m barrels of oil and is three times bigger than the controversial Cambo field that was put on hold more than a year ago.
A spokesman for the North Sea Transition Authority said:
We have today approved the Rosebank Field Development Plan (FDP) 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.
Rosebank is one of the most controversial energy projects, with hundreds of climate scientists and academics and more than 200 organisations from the Women’s Institute to Oxfam joining tens of thousands of people across the UK in opposition. Environmentalists argue that it contravenes Britain’s plan for a net zero economy.
Philip Evans, Greenpeace UK’s climate campaigner, said:
Rishi Sunak has proven once and for all that he puts the profits of oil companies above everyday people. We know that relying on fossil fuels is terrible for our energy security, the cost of living, and the climate. Our sky-high bills and recent extreme weather have shown us that.
The ugly truth is that Sunak is pandering to vested interests, demonstrating the stranglehold the fossil fuel lobby has on government decision making. And it’s bill payers and the climate that will suffer because of it. Why else would he make such a reckless decision?
This decision is nothing but carte blanche to fossil fuel companies to ruin the climate, punish bill payers, and siphon off obscene profits. We already have the solutions to cut bills, increase energy security and cut emissions, but the government ignores them in favour of handouts to corporations at the expense of the rest of us.
The news came as oil prices climbed by $1 a barrel, as markets worry about tight supplies heading into the winter and higher interest rates.
The oil producers’ cartel Opec, led by Saudi Arabia, and allies such as Russia have cut production and forecast supply shortfalls.
Brent crude rose more than 1% to $94.98 a barrel while US light crude is up 1.1% at $91.4 a barrel.
There are also concerns that higher interest rates could slow economic growth and reduce demand for oil. The US Federal Reserve has signalled that borrowing costs may need to be stay higher for longer than expected.
Separately, Hui Ka Yan, the billionaire chairman of the stricken property developer Evergrande, has been placed under police control, Bloomberg reported.
Hui was taken away by Chinese police earlier this month and is being monitored at a designated location.
It’s not clear why Hui is under so-called residential surveillance, a type of police action that falls short of formal detention or arrest and doesn’t mean Hui will be charged with a crime, Bloomberg said. This means he is unable to leave the location, meet or communicate with others without approval. Passports and identification cards must be handed to police but no longer than six months, according to the law.
Evergrande, the world’s most indebted property developer, is at the centre of a crisis in China’s property sector. A wave of defaults in the property sector has dragged down growth in China’s economy.
The Agenda
