Multi-billion-dollar field development poses stranding risk for investors

GLASGOW, 10 Nov — The proposed deepwater Cambo oil field off Scotland is uneconomic and its future exploitation is incompatible with the Paris goal of maintaining warming at or below 1.5° Centigrade, new analysis by Carbon Tracker released on Wednesday has found.

Carbon Tracker founder and executive chairman Mark Campanale said:

“Cambo is uneconomic and would not be financially competitive in a well-below 2°C world. Moreover, COP26 is showing the world the urgency of the climate crisis and if we are to ‘keep 1.5 alive’, this means this project is clearly amongst the first to fall by the wayside.

“The world has a great many existing oil projects that are lower cost and lower risk than Cambo and that are ahead in the financial pecking order.  The IEA has said that ‘no new oil, coal or gas is needed’ in a 1.5°C scenario and Cambo is blatantly one of those projects.”

Mark Campanale will be presenting this at the Scottish Energy Forum in Edinburgh tomorrow.

The thinktank utilises oil demand using different IEA scenarios — linked to specific temperature policy goals — to understand oil and gas supply. A cost-curve approach is used based on data from Rystad Energy, allowing those oil & gas projects which fall outside of a given temperature outcome to be identified. These are projects that risk taking the world well beyond climate limits and becoming stranded assets, with little or no economic value.

Based on Carbon Tracker’s modelling, the multi-billion-dollar Cambo oil field off Shetland has a breakeven oil price significantly higher than the marginal oil price under the IEA’s Sustainable Development Scenario (SDS, 1.65°C).  Put another way, the project is only financially viable if the world fails to limit global temperature rise to well below 2°C.

Ed Miliband, shadow business and energy secretary said:
“We should not be going ahead with the Cambo oil field, the equivalent of running 18 coal-fired power stations for a year. We need to phase out fossil fuels with a just transition for workers and invest in renewables to create the good jobs in the new industries of the future.”

Unsanctioned oil fields cost curve (2021-2040), Cambo breakeven cost and demand cut-offs for SDS and STEPS scenarios

Source: Rystad Energy research and analysis, Carbon Tracker

Projected output from fields that already produce or are in development amounts to an average of some 69 million barrels a day globally over the next two decades. In the SDS, Carbon Tracker’s analysis says there’s room for an average of 5 million barrels a day worth of additional oil fields worldwide. Cambo, however, would only be needed if the required amount of new oil was twice that, pushing supply further up the cost curve. That size of output would take the world well beyond climate targets.

The research findings for the new Cambo oil field are broadly in line with Carbon Tracker’s 2019 analysis of planned North Sea oil projects, that are at risk of becoming stranded. The six projects comprising £6.8bn of planned Capex, covered by The Ferret and The National, are due for sanction between 2020 and 2022.The more acute stranding risk is due to the fact that deepwater offshore oil projects, including those of West of Shetland, tend to be relatively more complex and costly than onshore projects.

Yet the British government, which is hosting the COP, appears to unreservedly back the new development currently under consideration by the UK oil and gas authority.

The UK government’s Scottish secretary, Alister Jack, has said that the new field should “100% get the go-ahead,” arguing it would be “foolish to think that we can just run away from oil and gas”. [1]

Tessa Khan, director of Uplift, said:

“Boris Johnson needs to decide if the UK’s to be a climate leader or climate laggard. If he approves Cambo, he’s ignoring climate limits that dictate there’s only so much oil we can burn. Cambo’s doesn’t make the cut: it’s too expensive to get out of the deep waters of the North Sea”

Friends of the Earth Scotland Campaigner, Caroline Rance, said:

“This is just one more reason why the Cambo oil field shouldn’t get the green light. Economics aside, the climate cost of Cambo would be devastating. The IEA has already shown that there can be no new oil and gas to stay within 1.5ºC. This new research is further evidence that Shell and oil companies like them have no intention of staying within the agreed limit for dangerous climate warming.

“Oil and gas production must be phased out in a managed way over the next decade, with countries like the UK who made their wealth from fossil fuels going first and fastest.
Investments should instead be redirected to scaling up renewables and ensuring a just transition so that every worker who wants to can retrain and move into a decent green job.”

About Cambo:

The Cambo oil field is located about 125km (75 miles) to the west of the Shetland Islands, and contains more than 800 million barrels of oil. The companies involved in its development are Siccar Point and Royal Dutch Shell, which was recently forced by a court ruling in the Netherlands to slash oil production in line with its Net Zero goals.

If approved by the Oil and Gas Authority drilling at Cambo could start as early as 2022. And the field is expected to produce oil and gas for approximately 25 years.

 Research Methodology

Carbon Tracker uses International Energy Agency scenarios to model global supply of oil and gas under a 1.65°C pathway (Sustainable Development Scenario or SDS) and a 2.7°C pathway (Stated Policies Scenario or STEPS) consistent with policies (rather than pledges) announced by global governments.

It uses STEPS to exclude from its analysis projects that are unlikely to be developed, allowing investors to focus on risk in companies’ “business as usual” portfolios.

With available supply outstripping demand beyond that which is satisfied by existing projects, the research assumes that new projects with the lowest production costs will be most competitive, while projects with higher breakeven prices run the risk of becoming “stranded assets”. Our recent report Adapt to Survive presents results for the world’s 60 largest oil and gas companies, calculating their exposure using project supply data from Rystad Energy, and focusing on the gap between SDS and STEPS.




Joel Benjamin                                  +44 7429 637423

Stefano Ambrogi                                  +44 7557 916940


About Carbon Tracker – The Carbon Tracker Initiative is a not-for-profit financial think tank that seeks to promote a climate-secure global energy market by aligning capital markets with climate reality. Our research to date on the carbon bubble, unburnable carbon and stranded assets has begun a new debate on how to align the financial system with the energy transition to a low carbon future.