The UK’s North Sea Transition Authority (NSTA) said it has granted development and production consent to Equinor and Ithaca Energy for the controversial Rosebank oil and gas field, north-west of Shetland.
The move is likely to provoke fresh criticism from environmental campaigners.
Rosebank is one of the largest undeveloped oil and gas fields on the UK continental shelf.
The field is expected to produce 300 million barrels of oil in its lifetime.
Equinor, which holds a majority stake in Rosebank, will invest $3.8 billion alongside its partner to develop the field.
Ithaca said Rosebank would underpin 8.1 billion pounds ($9.84 billion) of direct investment in Britain, supporting up to 1,600 jobs during construction. First production is expected in 2026-27.
Ithaca shares rose by more than 8%.
“The consent has been given by the oil and gas regulator to owners Equinor and Ithaca Energy, following the acceptance of the Environmental Statement,” said the NSTA.
An NSTA spokesperson said: “We have today approved the Rosebank Field Development Plan 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.”
Environmental campaigners had urged the UK government to halt the Rosebank development, arguing it contravened the plan for a net-zero economy.
Susannah Streeter, head of money and markets, Hargreaves Lansdown: “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 £58 million. 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 245 million 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.”
Russell Borthwick, CEO of Aberdeen & Grampian Chamber of Commerce: “Rosebank will make an important contribution to UK and European energy security, create several hundred new jobs here in Scotland and result in over £6billion being spent within the UK supply chain which is anchored in Aberdeen and Aberdeenshire.
“Crucially, while its approval will generate vast economic benefits, it will not increase the UK’s projected emissions.
“Today’s announcement is a welcome shot in arm for the UK energy sector which will give investors, operators and the wider supply chain confidence as they strive to provide the power we need here and now and transition towards a net zero future.”
GMB union General Secretary, Gary Smith: “The UK must be honest about where we are going to get the gas we need up to 2050 and beyond.
“Sourcing this securely from domestic supplies is so much better than doubling down on our dependence on imported gas, especially in an increasingly volatile world.
“Taking responsibility for more of our own gas supply will support good union jobs, both directly and in the wider supply chain.
“Crucially, it will also unlock investment for the carbon capture and clean power developments we need to confront the climate crisis.”
“If the UK is to achieve better energy independence and be in the global race for climate jobs, we need a plan, not bans.”