Gas from the Jackdaw field will start flowing within weeks after the UK Government approved the project in an effort to improve domestic energy security and provide an economic boost.
Energy Security and Net Zero Secretary Miatta Fahnbulleh approved the scheme and is now under pressure to back the separate Rosebank oil and gas field as a further sign of commitment to North Sea production.
The approval of Jackdaw is expected to increase domestic gas production by around 6% at its peak, safeguard hundreds of jobs and provide an estimated £2.9 billion economic boost.
Tax revenues from North Sea oil and gas will also be funnelled into a new energy wealth fund, backed with an initial £2 billion, which will be used to invest in renewable and low carbon projects.
The approval of Jackdaw has been sharply criticised by environmental campaigners who want to accelerate the shift away from fossil fuels.
But ministers argue that while UK households and businesses are still using gas, it makes more economic and environmental sense to increase domestic production rather than rely on imports shipped around the world.
Gas from Jackdaw, around 150 miles east of Aberdeen, will start to supply homes and businesses from the end of the month after Ms Fahnbulleh agreed that regulator the North Sea Transition Authority could approve the scheme.
Prime Minister Andy Burnham said the decision would “protect hundreds of jobs and help keep millions of homes warm this winter”.
He added: “At a time when people are really struggling, it’s right that we look in a responsible way at maximising the existing energy reserves we have in Britain that could help.”
The approval means gas from Jackdaw will start flowing within weeks (Stefana Massini/PA)
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Mr Burnham said the Government was taking a “pragmatic approach” to the North Sea but remained “committed to moving towards renewable energy” and reaching net zero emissions by 2050.
Chancellor John Healey said it was time to make the most of the UK’s domestic resources against a backdrop of international turbulence from the Iran and Ukraine wars.
Speaking at the St Fergus gas terminal near Peterhead in Aberdeenshire, he said: “Now is the time, with the conflict and the rising prices, to make the most of our own homegrown energy through production from Jackdaw.
“I’m also announcing this new energy wealth fund.
“It means the extra tax revenues that come from North Sea oil and gas can be directed into developing more clean energy projects for the future.”
Both Jackdaw and Rosebank were approved for drilling licences in June 2022, but these were overturned by the Scottish courts after a challenge from environmental campaigners.
This came after a UK Supreme Court ruling that developers had to account for the climate impact caused by burning fossil fuels in their planning applications.
Fresh public consultations on the proposals took place this year and closed in August, and the Government gave the green light to Jackdaw on Wednesday morning.
The approval of Jackdaw will not bring down soaring bills because gas prices are set by global markets, and energy minister Michael Shanks acknowledged “we will not stop being a net importer of fossil fuels because of this decision”.
But the move is expected to lead to the creation of 27 new jobs and secure 273 existing posts.
A decision on Rosebank, the largest untapped oil field in the North Sea, is being made separately.
Ms Fahnbulleh told BBC Radio Scotland: “Jackdaw is producing gas that predominantly is used in the domestic market, Rosebank is a different proposition because it is oil that is exported.”
The chief executive of Adura – the joint venture between Shell and Norway’s Equinor which is behind both schemes – called for Rosebank to also be approved.
Adura boss Neil McCulloch said: “Jackdaw represents a significant prize in its own right: £2.1 billion of investment and enough gas to heat the equivalent of around 1.4 million UK homes at peak production.
Protesters fathered outside the Department for Energy Security and Net Zero following the decision (Fossil Free London/PA)
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“Our attention now turns to Rosebank. It follows Jackdaw in the regulatory process, but the case for approval is equally strong. We believe that applying the same rigorous, evidence-based approach can lead to a similarly positive decision.”
US President Donald Trump has repeatedly called for greater drilling in the North Sea and the Jackdaw announcement was welcomed by his ambassador to the UK, who also called for Rosebank to be backed.
Ambassador Warren Stephens said: “Developing Britain’s own North Sea resources supports UK businesses and its people. A stronger, more secure UK energy sector benefits us all.”
Labour’s 2024 manifesto committed to issuing no new oil and gas licences for the North Sea and some of Mr Burnham’s MPs condemned the decision to approve Jackdaw, despite it having been first approved before the election.
Backbench Labour MP Alex Sobel said: “My view hasn’t changed. Jackdaw won’t draw gas for many years.
“It won’t make an impact on global prices and will give mixed messages in terms of investment of both renewables and decarbonisation of home heating.”
Former shadow cabinet minister Richard Burgon said it was an “absolutely terrible decision”, adding: “It will do nothing to lower people’s energy bills or improve our energy security.”
Environmental campaigners also hit out at Mr Burnham’s Government, with a protest staged outside the Department for Energy Security and Net Zero.
Ami McCarthy, head of politics for Greenpeace UK, said: “Approving Jackdaw shows the toxic grip fossil fuel lobbyists still hold over our energy policy.
“Andy Burnham promised pragmatism, but there is nothing pragmatic about rubber-stamping a project that won’t lower energy bills, won’t boost energy security and will create just 27 full-time jobs.”
Kate Norgrove, WWF chief impact officer, said: “This is a disappointing decision and the Government now urgently needs to show that it remains 100% committed to the clean energy transition by rejecting the even more damaging Rosebank oil field.”
Tessa Khan, executive director of campaign group Uplift, said Labour’s climate credibility is “on the line now” with Rosebank becoming the defining test.
She said: “Approving it would see the Government knowingly breach safe climate limits.”
Green Party leader Zack Polanski said the decision to approve Jackdaw was “climate vandalism”.
He said: “Today’s decision by Labour is a betrayal of all of our futures. Labour has abandoned all credibility in the fight against climate change.”
But Tory leader Kemi Badenoch said Labour should have taken the decision to approve Jackdaw earlier instead of “faffing about”.