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UK approves North Sea gas project
The approval
The project received its first approval in 2022, before a legal challenge from Greenpeace halted proceedings. The Labour government, which presents itself as environmentally conscious, had been grappling with the question for some time, amid rising energy prices, concerns over energy security, and the future of the UK North Sea oil sector.
Who will produce
Shell and its joint venture partner, Norway's Equinor, are expected to begin production within the next couple of weeks.
The energy backdrop
The decision comes as UK inflation rose to 3.5% for September, further above the Bank of England's target, while the Iran war continues to push global energy costs higher. Oil prices are rising Wednesday after Iran's Revolutionary Guard Corps said two oil tankers had struck mines in the Strait of Hormuz.
How can a legal challenge stop an energy project?
Large energy projects in the United Kingdom need an environmental impact assessment before approval. In 2024, the UK Supreme Court ruled in the Finch case that these assessments must include the emissions from burning the oil or gas the project produces. Approvals that had not counted those emissions became open to challenge. Projects whose assessments predated the ruling often had to be reassessed.
Why do mines in the Strait of Hormuz move oil prices?
The US Energy Information Administration estimates that about a fifth of the world's petroleum consumption passes through the Strait of Hormuz. The strait is narrow, and tankers travel in a few marked shipping lanes. Any threat to that traffic raises the cost of shipping and insuring cargoes. Traders price in the risk of lost supply before any barrels are actually missing.
How do energy prices feed into inflation?
Energy shows up in inflation directly through household gas and electricity bills and fuel at the pump. It also enters indirectly, because factories, farms, and trucking firms pay for energy and pass on part of the cost. For that reason, central banks such as the Bank of England watch energy closely when they set interest rates. The Bank of England's inflation target is 2 percent.
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