Private equity-backed operator Siccar Point has suspended development plans for the controversial Cambo oil project in the UK North Sea, following a decision by 30% project partner Shell not to go ahead with the investment.
Siccar Point chief executive Jonathan Roger said today: “Following Shell’s announcement last week, we are in a position where the Cambo project cannot progress on the originally planned timescale. We are pausing the development while we evaluate next steps.
"We continue to believe Cambo is a robust project that can play an important part of the UK’s energy security providing homegrown energy supply and reducing carbon intensive imports, whilst supporting a just transition.”
Shell sent shockwaves through the North Sea oil and gas sector last week when it announced it no longer wanted to invest in the West of Shetland project, saying the economic case was “not strong enough at this time” and also warning of “the potential for delays”.
The proposed $2.2 billion development is looking increasingly unlikely to move ahead, given UK policies on phasing out fossil fuels, as the current phase of its licence expires in just under four months.
Shell's decision followed months of fierce opposition to the scheme by environmental groups wishing to halt new oil and gas developments offshore the UK amid an increasingly bitter public and political debate about the nation's transition towards becoming a carbon neutral economy by 2050.
Campaigners opposed to Cambo, including Greenpeace, hailed Shell's decision as the beginning of the end for new oil and gas projects in the UK North Sea.
Industry has warned that oil and gas production should not be allowed to decline rapidly, which would risk increasing reliance on imports, sometimes from countries with higher carbon dioxide emissions.
Shell has not yet indicated if it intends to try and sell its stake to another company or simply relinquish the acreage.
Shell is also understood to have been concerned about the lack of government support for the development, plus the potential for legal action and reputational damage, given the controversy surrounding the project.
The current phase of the two licences covering Cambo — P1189 and P0128 — is due to expire at the end of March 2022, according to the Oil & Gas Authority (OGA) website.
If Siccar Point, which holds a 70% operating interest, has not reached a final investment decision by then, it will be required to ask the OGA for an extension.
Siccar Point became operator of Cambo, 125 kilometres north-west of the Shetland Islands, following its acquisition of OMV’s UK upstream portfolio for $870 million in 2017.
Originally holding a 100% interest in the field, its stake was reduced to 70% after Shell bought into the scheme in 2018.
In May this year, Graeme Sword, founding partner of Blue Water Energy, which owns Siccar Point with fellow private equity firm Blackstone, told Upstream the company was "on track" to complete a farm down within weeks of a portion of its 70% interest.
However, no deal had materialised before Shell announced its decision on Thursday last week.
Siccar Point’s chances of finding a new partner before the end of the current licence term are looking increasingly challenging.
In October, Shell ran into difficulties at another North Sea project — Jackdaw — after its initial proposals were rejected by the offshore environmental regulator.
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