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UK authorities issued on Wednesday their final approval to Shell's Jackdaw gas field development in one of the biggest projects in the North Sea in recent decades as the government looks to boost domestic gas supply to reduce dependence on imports.
Shell's Jackdaw field development plan received its final approval this week, and the field is planned to begin production in late 2025.
The field, located east of Aberdeen, has the potential to pump 6.5 percent of the UK's total gas production. Shell has had to amend the field development proposal after regulators rejected an earlier plan last year.
UK Business and Energy Secretary Kwasi Kwarteng welcomed the decision of the regulators to give the green light to the field development.
"Jackdaw gas field - originally licensed in 1970 - has today received final regulatory approval," Kwarteng said on Twitter.
"We're turbocharging renewables and nuclear, but we are also realistic about our energy needs now. Let's source more of the gas we need from British waters to protect energy security," he added.
Shell also welcomed the decision, saying it comes at "a time when UK energy security is critically required."
"Responsibly produced, local gas production plays an essential role in the UK's transition to net zero, will support thousands of jobs and forms part of Shell's broader intent to invest £20 to £25billion in the UK, with 75% intended for low and zero-carbon products and services," Shell said.
"However, as we have repeatedly stated this can only happen with a stable fiscal policy and we continue to look to the government for those assurances," the supermajor said.
This comes days after the UK slapped a 25% Energy Profits Levy on oil and gas companies as part of a package to ease the cost-of-living crisis stemming from huge rises in household energy bills.
The windfall tax legislation also contains a so-called investment allowance, under which operators developing new fields or improving existing facilities could claim huge additional reliefs against the new tax, Wood Mackenzie said.
"The move is unlikely to render new or existing projects uneconomic and it could even accelerate 'ready to go' developments, such as Rosebank and Cambo," said Neivan Boroujerdi, Research Director, North Sea upstream, at WoodMac.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.