The UK’s gas imports will increase dramatically over the next 30 years, according to official forecasts, even if all of the existing North Sea reserves are exploited.
The analysis by the Financial Times underlines Britain’s increasing reliance on overseas supplies of energy as the government comes under growing pressure from environmentalists to halt new domestic drilling.
The UK already imports more than half of its gas from countries including Norway, Qatar and Russia and official production and demand forecasts suggest that by 2030, this would rise to nearly 70 per cent, according to the FT’s calculations.
By 2040, the UK would only be able to meet a fifth of forecast gas demand from domestic resources and 15 per cent in 2050, according to the analysis of production projections from the Oil and Gas Authority, the industry regulator, and estimates of demand from the Climate Change Committee (CCC), an independent group that advises the UK government.
Britain’s energy security has come under the spotlight in recent months as fears of a potential supply crunch across Europe over the winter have pushed gas prices to unprecedented levels.
Ministers have resisted calls to end new drilling but have said all future oil and gas licences will be subject to a “climate compatibility” test.
Caroline Lucas, the UK’s only Green party MP, on Wednesday echoed the calls of campaigners to halt further exploitation of the North Sea when she told the House of Commons it was “extraordinary” that ministers were planning to approve new fields. She said the new drilling would be against the “spirit if not the letter” of the international COP26 agreement to cut emissions.
Greg Hands, energy minister, defended the government and pointed out it was ramping up renewable energy production. On Wednesday, the government confirmed it would hold key contract auctions for renewable technologies such as wind and solar annually, rather than every two years at present, to help accelerate the shift away from fossil fuels.
“Flicking a switch and turning off our domestic source of gas overnight would put energy security, British jobs and industries at risk and we would be even more dependent on imports,” he said.
Domestic oil and gas production has been falling since it peaked at the turn of the millennium and is in long-term decline. Last year, the International Energy Agency said energy groups must end all new exploration projects from 2021 if global warming is to be kept in check.
While the UK has set a goal to reduce greenhouse gas emissions to “net zero” by 2050, it also has a strategy to maximise the “economic recovery” of remaining North Sea reserves. Environmentalists have challenged the UK’s strategy, urging ministers to accelerate the shift to clean energy sources.
Although six North Sea projects were approved last year, campaigners were successful in thwarting the development of the Cambo oilfield north-west of the Shetland Islands. As many as 10 North Sea projects are awaiting approval this year and next, according to Westwood Global Energy Group, a consultancy.
North Sea gas production last year was an estimated 32bn cubic metres, according to the OGA, but output is forecast to fall to 17.5bn cubic metres by 2030, 6.9bn by 2040 and 2.7bn by 2050.
Demand for natural gas, which remains critical for heating homes and other industries, including power and fertiliser production, however, is set to fall at a slower rate than production. According to a “balanced net zero pathway” scenario set out by the CCC, UK demand in 2030 would still stand at 56bn cubic metres, dropping to 32.4bn in 2040 and 18.3bn a decade later.
Energy companies including BP and Shell, have warned ministers to resist any moves that could harm further investment in the North Sea after opposition parties called for a windfall tax on producers’ bumper profits to help fund measures to assist households with spiralling electricity and gas bills.
Ed Matthew, campaigns director at the climate think-tank E3G, rejected this argument. He pointed out that the North Sea was a “declining, high-cost basin that does little to change the market [gas] price in the short and long term”.