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The UK could generate half of the expected demand for oil and gas in the country under “appropriate business conditions,” and reduce the increase in dependence on more carbon-intensive imports, industry groups say.
Offshore Energies UK said the country is on track to produce 4 billion barrels of oil and gas, the equivalent of the 13bn-15bn forecast for use by the Independent Climate Change Commission, along the UK’s 2050 net zero emissions path.
However, if companies are encouraged to invest, the North Sea could produce another 2 billion to 3 billion barrels, adding an economic value of £150 billion to the expected £200 million based on current plans.
The OEUK forecast released on Tuesday in its annual business outlook sets for an industry case for the UK government to prioritize self-sufficiency over import dependence as it discusses the future fiscal, regulatory and environmental regime of the North Sea.
“The UK needs oil and gas, and we need to focus on producing a lot of ourselves,” said David Whitehouse, Oeuk’s CEO. “We’ll need new projects to achieve that goal, but most of them will come from existing licensing areas.”
Oeuk wants immediate reductions in windfall taxes to reflect lower prices and encourage investments in expensive North Sea drilling operations, said someone familiar with body thinking.
From 2030 onwards, the oil and gas sector will return to paying only permanent taxes, which are currently set at around 40%, but will automatically contribute if wholesale prices rise to an unusual level.
Collection of oil and gas profits was introduced in 2022 in response to rising energy prices following the Russian invasion of Ukraine.
Last year, the government increased collection to 38%, raising producers’ heading tax to 78% until 2030, and also deleted major investment allowances.
“When prices drop downwind, you have to pay taxes too,” the person said.
The government has acknowledged previous changes to the oil and gas fiscal regime, and hopes to give investors more certainty than future taxes.
The report highlights a “historic low rate of return” of 1%, minus 1% per year, up to June 2024.
Oeuk also called on the government to “eliminate” the import of liquefied natural gas from the UK consumption mix by supporting more domestic production.
Approximately 17% of UK gas imports came from US LNG last year.
The government says it will not allow new oil and gas licensing, but will consider additional production for existing facilities. However, the person added that a new license would be required to increase the output to its maximum potential.
Tessa Khan, executive director of Uplift, an organization that supports the fossil fuel stage, has accused the oil and gas industry of “exercise fantasy.”
“These outputs are only possible if the industry is receiving even more tax cuts, or punishing ordinary people who are already unable to afford energy bills because the prices are so high,” she said.
New domestic production “confines us to an outdated and expensive energy source for longer than necessary,” she added.
Prime Minister Rachel Reeves told the Sun on Sunday that developments in Rosebank and Jackdeau’s oil and gas fields will move ahead despite legal challenges to the environment.
