Eighty miles north-east of the Shetland islands, where hundred-foot waves make their ceaseless passage from the thinning edge of the Arctic towards the rugged coasts of Scandinavia and Scotland, lies a patch of empty sea recent christened Rosebank. Discovered in 2011, some 9,000 feet below the surface, it is the largest untapped oil field in the North Sea – three times bigger than the nearby Cambo field found some ten years before. Over its lifetime, Rosebank is expected to release 200m tonnes of CO2 into the global economy – equivalent to the annual emissions 700m people, or 28 countries – and will single-handedly set fire to the UK’s remaining climate budgets, in a great flare-off of our commitment to the Paris Agreement.

Naturally, then, Prime Minister Rishi Sunak approved the Rosebank license in 2023, embracing it as an emblem of his ‘why should I make sense?’ climate and energy policy. Claiming it will lower energy bills seems obtuse when 80% of the crude will be exported (the UK lacks the facilities to refine most of its own flavours of oil). The first barrel won’t arrive until 2026 or 2027 anyway; sadly, Labour have already committed to honouring the license should they win the next election. The UK remains Europe’s second largest oil producer after Norway; that doesn’t look like it will change any time soon. 

The need for a full stop

This matters, because we cannot afford any new oil and gas fields – at all. The International Energy Agency’s (IEA) scenario report makes this perfectly clear; if we are to hit net-zero by 2050, 2021 was the final deadline for new field developments. 

(That scenario, incidentally, is only calculated to give us a 50:50 chance of hitting 1.5 degrees. Present that factor of safety to anyone on an oil rig and they’d throw you off the side!)

In the words of IEA director Fatih Birol: “if we make large scale oil, gas and coal development, we cannot reach our 1.5 degrees target, full stop.” 

That’s it. We’re done. No new fossil fuels, ever. 

So what on earth are we doing in Rosebank?

Equinor equivocates (or not)

As detailed above, there is little hope of the UK political system doing the rational thing in an election year. That leaves the private sector.  

Whatever their adverts say, the oil companies know exactly what they are doing: cashing in. Rosebank is owned by oil major Equinor, with a minority stake held by pure-play driller Ithaca Energy. These companies understand that exploration is the engine of future profitability as they suck their existing fields dry. Equinor’s homepage may be plastered with pictures of wind turbines and talk of the transition, without a single mentioning of oil or gas. But it invests $6 billion to drill up to 30 new exploration wells each year. It’s published business plan makes no effort to hide an intention to produce as many barrels in 2030 as it does today, by approving 500 billion new barrels each year to replace declining assets. As these barrels get more unconventional (half of all exploration is fracking, tar sands, arctic and deep-water) its emissions profile will actually increase by 10% by the end of the decade.  

The company announced a profit of $28.7bn last year, its biggest ever. Just FYI. 

Banking on the alliance

If oil companies are the proverbial turkeys that won’t vote for Christmas, can the rest of the economic system force them anyway? One of the strongest levers here is the financial system. Oil exploration is an expensive, risky business, which historically runs on speculative capital and debt. Choke off the money supply (amongst other things) and it may die of its own accord. 

You would be forgiven for thinking that big banks are climate allies in this regard. Since launching in 2021, the Net Zero Banking Alliance (NZBA) now counts 44 institutions as members, covering 40% of global banking assets. That’s $74 trillion signed up to Paris-compliant, science-based targets. Independently, 17 of Europe’s largest 24 banks have publicly committed to stop funding new oil and gas exploration. 

So how exactly are Rosebank and similar new projects still going ahead?

Promises, promises...

The reality of commitments to stop funding fossil fuel expansion is that they are largely not worth the paper they’re written on. Many banks have pledged to no longer finance new oil and gas projects. But that only restricts direct funding. Banks are still free, under these commitments, to extend other forms of credit to oil and gas firms, from re-financing to equity arrangement to ‘general-purpose corporate loans.’ 

What do you imagine Equinor and Ithaca do with general-purpose loans? Money is fungible – once it’s in the company pot, there’s no distinguishing one dollar from another. If the average human being can wrap their imagination around that one, you can be sure that the smartest financiers in the world – who run these banks – know exactly what is going on. 

Big European banks lent over $400bn to companies engaged in exploration in the same period. 92% of that fossil fuel funding was general purpose. Only 8% was project specific. These new ‘restrictive’ commitments only apply to a minority of deals anyway.  

Those dates are important, capturing the period between the Paris Agreement and the founding of the NZBA. But what about the period since – have banks cleaned up their act since signing up to the Alliance? Sadly not. Since NZBA launched in April 2021, its members have lent at least $38 billion to the top 50 oil and gas explorers, in complete contradiction to their commitment to Paris compliance. 

Half of that money comes from just four main offenders: Barclays, HSBC, Deutsche Bank and BNP Paribas. 

In next weeks article, we’ll look at the two of those examples in more detail – as well as another European bank that demonstrates how to make commitments on fossil fuel funding that actually stick.