Analysis suggests new North Sea oil licences will do nothing for UK energy security

Critics say new deep water drilling on continental shelf carries a 'high reputational cost' for the British government

Analysis from the Energy and Climate Intelligence Unit has suggested that new projects, such as Rosebank, would make little difference to energy security. PA
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New oil from the proposed North Sea licences will add less than 1 per cent of the petrol used in the UK's cars within seven years, analysis has found.

One of the government’s arguments for supporting further production is to increase the UK's energy independence and security.

However, the Energy and Climate Intelligence Unit said new projects, such as Rosebank, would make little difference.

“It doesn't help with security of supply, because oil and gas are part of international markets and 80 per cent of the oil is exported and processed overseas and who knows where it ends up as fuels,” Dr Simon Cran-McGreehin, head of analysis at ECIU told The National.

“Even if the UK was to horde all the oil we produce, it doesn't meet our needs – there's not enough of it any more; we currently use more oil than we produce in the North Sea so we'd have to import some anyway.

“They [the government] used to say it'll help cut prices. It won't, because oil prices are set internationally and UK production is a tiny, tiny percentage of global production.

“We cannot move the dial on production.”

Analysts like Dr Cran-McGreehin are concerned that while the new North Sea licences make almost no contribution to improving the UK's energy security and no effect on lowering prices for British motorists, the new drilling damages the UK's energy transition efforts.

“It comes at the expense of the UK's reputation as, what we used to say, a climate leader,” Dr Cran-McGreehin said.

“It just seems like such a high reputational cost and the slower we move on decarbonisation, the more exposed we are to fossil fuel shocks in the future.”

The government also said North Sea oil and gas would reduce the UK’s reliance on imports and reduce the emissions involved in shipping.

In answer to a written parliamentary question, the government accepted that about 80 per cent of the oil produced in the UK is refined overseas into products that are then shipped back over.

It also said “it is not desirable to force private companies to ‘allocate’ oil and gas produced in the North Sea for domestic use”, appearing to admit that much of the oil produced by Rosebank and other projects would be sold abroad.

The government is also trying to pass legislation, due in the House of Commons on Monday, that would require the North Sea regulator to invite applications for new oil and gas licences on an annual basis instead of the five-year average now in place.

Critics have accused the government of backing new production to create a dividing line with Labour as a general election approaches.

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“The reality is very little of the oil pumped from the North Sea is refined and sold on British soil, and even then the price is largely dictated by international markets,” said Prof Gavin Bridge, fellow of the energy institute at Durham University.

“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.”

For its analysis, the ECIU looked at oil from UK fields produced in British refineries and at products made in those refineries such as diesel, petrol and aviation fuel.

They found that very little oil used in the UK is produced and refined there – only 13 per cent in 2022.

As the amount of available fuel in the North Sea declines and demand falls, this will reduce to 1 per cent by 2030.

“New licences are a distraction from policies that would have a real, lasting impact on the UK’s energy independence,” said Dr Cran-McGreehin.

“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.”

A representative from the Department of Energy Security and Net Zero said: “With energy markets becoming more unstable, it makes sense to make the most of our own home-grown 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.”

Updated: January 08, 2024, 1:17 PM