6th February 2023 - LONDON. New research by Global Witness reveals the potential climate impact of Shell’s new £800 million North Sea oil project, which would create only a few dozen permanent jobs and replace rigs that British taxpayers have spent hundreds of millions of pounds shutting down.

The new Chinese-built rig – called Penguins – is being shipped to an oil and gas field in the North Sea – also called Penguins. But if Penguins comes online as planned in the next few months it will generate billions for Shell’s shareholders.

At the end of January four Greenpeace activists boarded the ship carrying Penguins, calling for an end to Shell’s North Sea drilling.

The new analysis found that:

  • If all of the oil and gas that Penguins could extract is burned, it would generate 43 million tonnes of CO2. This is more than the whole of Sweden or Ireland or Portugal produced in 2021, the last year for which data is available, (1) and flies in the face of the UK’s 2021 Net Zero strategy “to reduce our reliance on hydrocarbons as swiftly as possible.”

  • Since Shell started reporting its tax breaks in 2015, the UK government has given the company almost £494 million in tax refunds to shut down rigs in the North Sea, some of which Penguins will replace. (2) In a response to Global Witness, Shell stated that such rebates were normal – reimbursements from the government for the cost of shutting down its rigs.
  • These rebates could cover the cost of training over 18,000 heat pump technicians – green jobs that are needed now and for decades to come.
  • These tax breaks are also the main reason Shell has paid so little UK tax since 2015, when the company began reporting payments.
  • Only around 70 people are expected to work long-term on the Penguins rig. According to Chinese media, it has been designed with the “highest level of automation.” Shell has said publicly that Penguins would employ between 300 and 400 jobs, but only to get the rig operational, and in a response to Global Witness said its overall “activity” in Scotland “supports around 11,700 full-time equivalent jobs.

 The Penguins rig will be the UK’s largest new oil and gas project for at least the next two years, according to energy analyst firm Rystad. (3)

The rig could net Shell and its partner NEO Energy over £820 million in cash by 2025, or £2.2 billion by 2032, Rystad estimates. (4) Redeveloping the oil field including building the Penguins rig, will cost Shell and NEO over £800 million to build.

Jon Noronha-Gant, Fossil Fuels Campaigner at Global Witness says:

"Shell’s giant new oil rig is a symbol of how out of touch the UK government is with what this country needs. In the midst of an energy affordability crisis that was caused by our deep dependency on fossil fuels, our leaders have given half a billion pounds in tax breaks to one of the world’s richest oil companies, only for that company to build another oil rig that could make them billions more in profits.

“Penguins is an undetonated carbon bomb – it will emit more carbon than whole countries, and is an act of self-sabotage to the UK’s plans to become Net Zero by 2050 and become the birthplace of the Green Industrial Revolution. Shell’s claims about job creation are also a red herring – the rig was built in China and will only create a few dozen long-term jobs.

“If the UK is serious about solving the energy crisis and the climate crisis, it should keep North Sea oil in the ground. We need to transition to a cleaner, more secure energy system that’s built on investment in cheap alternatives to fossil fuels in the form of solar and wind power, and the creation of hundreds of thousands of new high-skilled, high-wage green jobs.”

Notes for Editor

(1)   Global Witness estimated the carbon emissions Penguins could produce based on the field’s “recoverable economical resources” – how much oil and gas Shell can economically extract. This is different from how much total oil and gas the field contains – its “reserves” – which can include fossil fuels that cannot be economically-extracted. According to Rystad, Penguins has recoverable economical resources of 80 million barrels of oil and 6 billion cubic metres of gas. Emissions calculations also do not include emissions produced as a result of the extraction or transportation of oil and gas. In a response to Global Witness, Shell stated that it is “typical” for 20 to 30 percent of all oil and gas contained in a field to be extracted. Full calculations are available on request.

(2)   UK rebates are calculated based on Shell’s annual Reports on Payments to Governments, which have been published since 2015. Full calculations available on request.

(3)   The Penguins rig will extract oil and gas from wells in the Penguins field, including eight new wells and wells that have previously sent oil and gas to older, now-closed, “Brent” rigs. Because oil and gas has previously been extracted from the Penguins field, the rig is termed a “redevelopment” project. However, with the closure of the Brent rigs and the introduction of the new Penguins rig, Rystad considers the project new and to be the largest new UK project during 2023 and 2024 by volume of oil and gas that could be extracted. The technical name of the Penguins rig is the Penguins FPSO (Floating Production, Storage, Offloading). Oil from the rig will be transported by ship and gas is piped to Scotland. It is a joint venture between Shell and NEO Energy. An image of the rig is here and the location where the rig will ultimately operate is here.

(4)   Calculation represents Shell’s Penguins free cash flow, the company’s earnings after it pays expenses and taxes, but before it pays debt, dividends, or reinvestment costs. Calculations assume current exchange rates and do not account for inflation.

(5)   In its response to Global Witness, Shell stated that the Penguins platform was needed because of a continuing need for fossil fuels and that the company was also investing in “low carbon energy.”

(6)   The Penguins rig set sail from China in December. It will first dock in Norway for a few finishing touches before settling in the North Sea to start operating. The rig is being carried to the UK on the back of the transport ship White Marlin. A video of the White Marlin carrying Penguins is here, and its progress can be tracked here, using its IMO identification number 9670224.