Vladimir Putin is emerging as an unlikely saviour of UK oil and gas as tension between Russia and Ukraine heightens worries over fuel imports and leads to further calls for ministers to encourage drilling in the North Sea.
Russia is the largest provider of diesel to the UK — about 3.6 million tonnes were imported in 2020 — but Putin, the Russian president, is likely to cut off supplies in retaliation for the tough sanctions threatened by Boris Johnson if Ukraine is invaded. Diesel is essential for motor vehicles, trains, construction and the military.
Separately, Offshore Energies UK (OeUK), the trade body, has warned that domestic production of oil and gas will decline sharply over the next five years, which will increase Britain’s dependence on imports. The group said that Russia’s threatened invasion of Ukraine had shown the importance of the UK having its own energy supplies and minimising imports.
“The best way of securing supplies for the UK is by being at the start of any pipeline, not the end,” said Ross Dornan, from OeUK. “The move to net zero means that UK demand for oil and gas should decline over the next three decades, but lack of investment means UK production is falling far faster than demand.
“That is creating an energy gap that will have to be met by imports, including from Russia. The resources under the UK’s continental shelf mean our nation can minimise this risk but only if we invest in new fields and wells.”
More than 11 billion “barrels of oil equivalent”, the industry measure, are in proven or probable reserves in the North Sea, enough to meet UK demand for 13 years at current rates, but low investment means that less than half (40 per cent) can be extracted. OeUK said less than £1 billion of North Sea investment had been committed by oil and gas companies this year, down from £16 billion in 2014.
In recent weeks, UK ministers including Greg Hands, the energy minister, and Kwasi Kwarteng, the business secretary, have signalled greater support for new North Sea projects. Hands said Britain must keep drilling for gas in the North Sea for “reasons of energy security”.
Their position is at odds with environmentalists and the SNP, which has signalled a shift away from fossil fuels because of concern over the climate crisis. Ryan Morrison, from Friends of the Earth Scotland, said the answer was to focus on ending our need for diesel and boosting public transport.
“The UK’s fossil fuel energy system only benefits oil and gas companies who make billions in profits whilst millions of people can’t afford to heat their homes and our climate is destroyed. It beggars belief that anyone with a shred of concern for people or the planet would want to further lock us into that system.”
The Oil and Gas Authority (OGA) indicated last week that increasing UK production could stabilise supply and benefit the climate as imported fuel may come from countries that are less committed to reducing emissions.
A three-year study led by the OGA, which concluded this month, found that using wind to power UK oil and gas platforms instead of gas and diesel generators could abate 70 per cent of offshore emissions. It said eight new North Sea fields were expected to come on line this year with a further 19 projects on the way.
There is speculation that drilling for oil and gas could begin in the Rosebank field, west of Shetland, and at Jackdaw (which was initially rejected last year), Marigold, Brodick, Catcher and Tolmount East in the North Sea.
Tony Mackay, an Inverness economist who advises the World Bank and the European Commission, said about 15 undeveloped oil and gas fields were in UK waters, including the Cambo discovery.
Their development, he said, should not have an adverse effect on the growth of renewable energy in the UK and “would certainly reduce our import dependency”.
According to the Digest of UK Energy Statistics, 3.6 million tonnes of diesel were imported from Russia in 2020. A further 854,000 tonnes came from Sweden. In total, the UK paid Russia more than £4 billion last year for fuel; £2.6 billion for refined oil (mostly diesel but also aviation fuel); £1 billion for crude oil and £600 million for gas. About 3 per cent to 4 per cent of UK gas came directly as liquefied natural gas from Russia, which also supplies Europe via a pipeline network that includes the UK. It suggests that the UK’s dependence on gas from Russia could be higher.
The UK government has made a commitment to end the sale of new diesel and petrol cars by 2030 but the Committee on Climate Change estimates that UK oil and gas demand will still be about 65 million tonnes of oil equivalent by 2050, with only a third met by domestic production. Gas sourced from the UK continental shelf is projected to decline annually by about 6 per cent unless more fields are opened.
Ryan Crighton, policy director at the Aberdeen & Grampian Chamber of Commerce, said increasing reliance on fuel imports placed jobs and Britain’s energy security at risk, and exposed consumers and businesses to price spikes.
“There is also a strong environmental case for producing more domestically. There is no current future scenario where there is not a requirement for some oil and gas,” he said.
“This leaves us with two options: to produce this domestically, supporting 200,000 jobs with full control over the regulatory environment in which it is extracted, or to import an increasing amount of our energy, with the heavier carbon toll that shipping it from other parts of the world carries. The latter makes little economic sense and even less environmental sense.”
