© Bloomberg From the 1970s, offshore oil and gas production transformed the UK’s energy system. In the aftermath of the 1973 oil crisis, the UK was a net importer of some 1.8 million b/d of oil. By 1980, it had reached self-sufficiency. It would be a net oil exporter until 2005, a position few European countries could rival.
Gas production followed oil, gaining a major role in the UK’s energy economy as a petrochemical feedstock, power generation source and heating fuel. Some 23 million UK homes still use gas for heating, hot water and cooking, and it accounts for almost a third of the UK’s primary energy supply.
Domestic production peaked in 2000, and the UK returned to being a net importer in 2004.
From friend to foe
Fast forward to 2025 and fossil fuels have turned from friend to foe. With the successful phasing out of coal, gas has become the dirty part of the country’s power system. Import dependence means exposure to international pricing and consumers have paid dearly in recent years as the loss of Russian pipeline gas drove European LNG demand skyward.
The government has adopted a policy of high taxation and a halt to new oil and gas licenses on the basis that further exploitation of fossil fuels runs counter to the overarching goal of net zero.
However, the UK will almost certainly still be using some oil and gas even in 2050. The government’s own forecasts suggest that under the Committee on Climate Change’s (CCC) balanced energy transition pathway, the UK will be consuming 14.6 million tons of oil equivalent (mtoe) and 14.1 mtoe of gas in 2050. Of this, the majority will be imported.
At no point in the UK’s energy transition does it return to being a net exporter of either oil or gas, whether outstanding resources are developed or new discoveries are made.
As such, maximising North Sea oil and gas output would not only reduce the UK’s fossil fuel import bill, but investment levels in the sector would be higher – sustaining jobs, supply chains and government revenues.
Offshore Energies UK (OEUK), the UK’s offshore trade association (formerly Oil and Gas UK), estimated in its 2025 Business Outlook report that the UK is on track to produce 4 billion barrels of oil and gas out of the 13-15 billion the CCC estimates will be required in the period to 2050.
OEUK says that, under the right conditions, a further 3 billion barrels could be produced – allowing the UK to meet half its oil and gas needs. This would add £150 billion in gross value to the UK economy on top of the £200 billion from planned production, the organisation estimates.
There are many factors that would affect whether this oil would be produced, such as the international price of oil and domestic taxation, and OEUK is there to lobby for offshore business. But the argument that maximising output has economic and energy security benefits is undeniable.
And, yes, it would aid a ‘just transition’. A transition means social and economic dislocation for communities and local economies invested in oil and gas. The more gradual the transition is, the easier the impact can be dealt with.
The average age of workers in the UK oil and gas sector is about 44 years, higher than the average, with a significant number over 50. Retraining is hard for this age group and not all workers have skills that can be easily redeployed in offshore growth areas such as wind farms.
The oil industry will not invest in clean energy until it pays
There are, of course, counter arguments. For example: sustaining investment in the fossil fuel sector gobbles up capital that could serve the energy transition. But is that true in this case? It is not as if oil companies’ commitment to clean power is deep.
Recent u-turns by the major European oil companies – formerly lauded for diverting just a tiny share of their investment spend towards cleaner energy developments – highlight that, for them, profit not the environment is what matters most.
While the returns from oil and gas remain higher than clean energy, they will drill. And if they cannot do it in the UK, there are plenty of places where they can.
Shutting down North Sea oil does not help the energy transition, because eliminating an element of supply does not change demand.
Rather than be channelled into clean energy investment at home, oil money will head to easier jurisdictions to produce oil and gas, which the UK will then have to import. The government will lose out on revenue, which is money that can be directed to support the energy transition.
A second argument for minimisation is that sustained investment in fossil fuels locks them into the UK energy system and creates a body of interest for the perpetuation of their use. It certainly does the latter, but there is no likely scenario in which UK oil and gas production does not continue to decline – and no likely scenario in which the country does not continue to import oil and gas.
This is not a case of expanding oil and gas production, but one of managing decline. North Sea oil and gas is already a sunset sector in what will become a sunset industry.
The environmental imperative
These arguments put the UK first, but climate change is a global problem. Is there a wider moral imperative that says the UK should minimise or even stop oil and gas production altogether?
If North Sea oil production ceased tomorrow, it would mean the loss of about 700,000 b/d of oil. However, OPEC maintains about 5 million b/d of spare capacity, 3.1 million b/d in Saudi Arabia alone. Any global gain in GHG emissions would depend on whether the oil and gas that replaces UK production has a lower upstream carbon intensity than imports, which would, in turn, hinge on their origin.
Refineries choose their crude inputs based on a combination of price, suitability for the refinery’s configuration and the desired output in terms of oil products at the time, so it is hard to say what crudes would replace UK crude. The upstream carbon intensity of oil fields and regions varies considerably.
There might be an environmental bonus or there might not, but the government is better able to monitor and incentivise emissions reductions from upstream operations in the UK than it is in foreign countries.
Gas supply would be logistically more problematic, but the large expansions in LNG capacity in Qatar and the US over the next few years would serve to rebalance the market. According to the North Sea Transition Authority, UK gas has a carbon intensity of 21kg CO2/boe, compared with an average carbon intensity for LNG imports of 79kg CO2/boe. This suggests there would be a net increase in GHG emissions from replacing domestic production with gas imports.
Demand should be the target, not supply
Shutting down North Sea oil does not help the energy transition, because eliminating an element of supply does not change demand. The UK would simply import more rather than use less.
Kill demand and supply will dry up: provide incentives for electric cars, electric heating and industrial decarbonisation and invest in clean energy and the electricity infrastructure needed to connect clean power generation with consumers. As demand for fossil fuels erodes, the UK’s oil and gas import bill and its exposure to volatile international pricing will decline.
Attacking demand and maximising North Sea oil and gas are in fact complementary, as they both reduce the import bill and increase energy security. The energy transition is making a host of calls for government funding and needs billions of pounds in state support. There is little fiscal sense in exchanging oil and gas revenues for a higher import bill.
In any scenario, the UK oil and gas sector is in terminal decline – but it still makes sense to get the most out of it before saying a final goodbye.
