The UK is facing a “stark energy choice” in which it must invest in its offshore oil and gas industry “to build energy security, jobs, and a managed green transition” – or rely on other countries for its energy needs.
That’s the warning from powerful trade group Oil & Gas UK (OGUK), the representative body for the UK’s offshore oil and gas industry.
OGUK said the UK still gets 73% of its total energy from oil and gas, with the UK Continental Shelf providing around 70% of this demand.
It said that between now and 2050, half the UK’s energy will still need to come from oil and gas.
According to the annual Economic Report from OGUK, the UK’s gas imports hit a record high in winter 2021 – underlining “the need to manage the UK’s transition to green energy while minimising reliance on other countries.”
The report found that the UK had to import 56% of the gas needed to keep British homes warm and its power stations running between January and March this year.
“The UK is now among Europe’s largest consumers of gas,” said OGUK.
“About 23 million homes (about 85%) rely on it for central heating and hot water, as well as providing heat and power for business and generating 35% of the UK’s electricity.
“The gas imports were needed because demand rose last winter at the same time as UK production fell – partly due to Covid 19 but also because gas output from the North Sea is in long-term decline.
“The report also found that, overall, the UK still gets 73% of its total energy from gas and oil, with production from the UK Continental Shelf providing around 70% of this demand.”
Electricity generation reflected such trends, said OGUK.
It said renewables met 42% of electricity demand in 2020 but electricity accounts for only 20% of the UK’s total energy use.
OGUK Chief Executive Deirdre Michie said: “Oil and gas provided nearly three-quarters of the UK’s total energy last year, and we will continue to rely on them to heat our homes, keep our lights on and create many of our everyday essentials from medicines to mobile phones to road surfaces.
“About 85% of UK homes are still heated by gas but imported gas hit a record high last year.”
OGUK said failure to invest in new oil and gas fields – to replace those in decline now – would mean the UK could meet only a third of its future needs, leaving the UK more reliant on imports.
The report said such findings underlined the need to “invest in new oil and gas developments to ensure security of supply and underpin a strong domestic industry to build the low-carbon energy ecosystem of the future”.
The report said the oil and gas industry is ready to invest £21 billion over the next five years into exploring and producing UK oil and gas.
But it warns: “In a no-further-investment case, total capital investment could fall to less than £1 billion per year by the middle of the decade as the UK increased its reliance on imported fossil fuels.”
OGUK said the industry has worked with the UK government to develop a strategy to meet the UK’s needs to maintain energy supplies and transition to a low carbon future.
The North Sea Transition Deal, signed this year, is an agreement between government and industry to support UK industry, minimise imports and help retain the skilled workforce needed to move the UK to a net-zero future.
OGUK said the report also found that:
- Between now and 2050, half the UK’s energy will still need to come from oil and gas.
- UK offshore oil and gas 2021 activity generated gross value added across the UK of £31.1 billion.
- The oil and gas sector is forecast to support almost 200,000 UK jobs in 2021.
- It also remains a net contributor to the economy, with £360 billion paid to the Exchequer in production tax over the last 50 years, and £33.7 billion since 2010.
- A ‘cliff-edge’ transition, by cutting UK gas and oil production, would risk jobs and leave us reliant on imports – damaging our balance of payments but doing nothing to cut demand or emissions.
Michie added: “We all know that change is needed so the question is how fast we make that change.
“This report shows the reality that cutting off the domestic production of oil and gas faster than we can reduce demand risks leaving us increasingly dependent on other countries that often generate higher emissions.
“Cutting back our greenhouse gas emissions will not be easy, but we will do it faster if we support the companies and people who have the skills to get us there.
“From energy workers to energy consumers, we all need a managed and fair transition which benefits everyone.
“While the UK continues to use oil and gas, we should make the most of the resources we produce here.
“The North Sea Transition Deal reduces the need for imported energy, makes us more responsible for our own emissions and supports UK companies and people who are already investing in cleaner energy.”