New North Sea licences will make ‘little difference’ to UK energy security, claims think tank

North Sea oil from new exploration licences sent to domestic refineries would account for less than 1% of the fuels used in the UK in 2030, a think tank has found.

The Energy & Climate Intelligence Unit (ECIU) said, as a result, new developments such as Rosebank and proposed annual North Sea licensing rounds would “make little difference” to UK energy independence and security.

The ECIU examined the use of oil produced from the UK continental shelf (UKCS) in UK-based refineries and products made in those refineries, such as diesel, petrol and aviation fuel.

It said just 13% of the oil-based fuels Britons use came from UK oil fields via UK refineries in 2022.

The full picture? 

According to UK government statistics, the UK became a net importer of oil products in 2013, meanwhile the country relies on European refineries to send its crude to due to a lack of capacity.

Other types of crude oil are imported for processing in UK refineries.

UK oil refinery production in 2022 was nearly half that of peak production in 1998 and the country is reliant on imports to meet refinery demand for specific crude types.

Industry figures have highlighted that, as a net importer of oil, the UK is a beneficiary of the global open market system which ensures it can get the oil it needs.

ECIU analysis

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According to the ECIU, even if UK oil production was expanded to the maximum level in projections by the North Sea Transition Authority (NSTA) – if demand for fuels does not fall – then this would still leave only a small minority of fuels used in the UK coming from UK oil fields via UK refineries.

In this scenario, by 2030 one in every 20 litres of petrol, one in every 26 litres of road diesel, and one in every 50 litres of aviation fuel used in the UK would come from UK produced and refined oil.

Licensing and offshore supply chain

According to trade association Offshore Energies UK (OEUK), 70% of demand on the offshore energy supply chain is servicing oil and gas activity.

OEUK forecasts this is likely to be the largest source of activity until at least 2026/27, the point when offshore wind and carbon storage project activity could ramp up significantly.

If policies that end new licensing are introduced, OEUK said this will constrain UK business opportunities and hamper investment in the offshore supply chain required for the rollout of renewables projects.

Similarly, a drilling industry body recently warned the viability of UK renewables projects is at risk due to the exodus of drilling rigs from the North Sea.

Offshore industry representatives argue future North Sea exploration licences are an important factor in improving overall UK energy independence and security.

New North Sea licences a “distraction”

ECIU head of analysis Simon Cran-McGreehin said new North Sea licences are a distraction from policies that would have a “real, lasting impact” on UK energy independence.

“Oil from new fields such as Rosebank will be traded internationally – as the government has admitted, this oil is not earmarked for the UK and it won’t make any real difference to UK prices,” Mr Cran-McGreehin said.

“The Government’s recently introduced ZEV (zero emission vehicle) mandate to boost EVs will have a much bigger impact by reducing our demand for oil in the first place.

“But much more could be done to boost the UK’s energy independence by properly backing British renewables and helping people insulate their homes to cut energy waste.”

© Supplied by Teekay

Mr Cran-McGreehin said unless the government increases its efforts to support renewables, as production from the North Sea continues to decline it will put UK energy independence in further jeopardy.

Durham University Durham Energy Institute fellow Professor Gavin Bridge said very little of the oil pumped from the North Sea is refined and sold on British soil.

“Even then the price is largely dictated by international markets,” Professor Bridge said.

“The notion that more drilling on the continental shelf boosts our energy security doesn’t stand up to scrutiny.

“Most of the oil is extracted by private or foreign state-owned companies over which the Government has little control.”

Boost homegrown advantages

A Department for Energy Security and Net Zero spokesperson said: “With energy markets becoming more unstable, it makes sense to make the most of our own homegrown advantages in the North Sea.

“That’s why we’re backing the UK’s oil and gas industry with annual licences, supporting 200,000 jobs and giving them certainty to invest in jobs here and unlock billions in tax for our own transition to clean energy.

“As a net importer of oil and gas, the UK increasingly produces less oil and gas than it uses. These new licences will not make us a net exporter or increase carbon emissions above our legally binding carbon budgets.”

The findings come as the UK government today introduces its Offshore Petroleum Licensing Bill for its second reading in parliament, and as some Conservatives signal their intent to rebel against the measures.