UK can reduce energy imports and unlock investments worth $60 billion, says Wood Mackenzie

The UK can work to significantly reduce its reliance on energy imports in its new energy security strategy despite high commodity prices and Russia’s invasion of Ukraine, according to a report by Wood Mackenzie released on Thursday.

Examining the levers the North Sea can pull to increase production, the report argues that indigenous oil and gas still have a major role to play in the UK’s energy mix.

Setting out five levers to boost production - execution, new greenfield projects, increasing recovery from existing assets, exploration and the development of contingent resource – the report estimated that if all economically viable resources were to be produced, it could deliver 5 billion barrel of oil equivalent (boe) of new volumes and US $60 billion of investment for the UK energy market. 

According to the report, titled ‘How much more oil and gas can the North Sea produce?’ UK demand for oil and gas will continue to outstrip supply but there are wide ranges of uncertainty. In 2030, production will be between 0.6 million barrels of oil equivalent a day (mmboe/d) and 1.6 mmboe/d – while the range for demand is even wider.

“By 2050, UK North Sea production will have largely ceased. But even in a net zero scenario, demand will persist with emissions being offset by carbon capture and storage (CCS) and nature-based solutions,” Neivan Boroujerdi, Research Director, North Sea Upstream for Wood Mackenzie, said in a statement.

“Current levels of production could be maintained for the next decade, underpinning energy security and safeguarding jobs. But the UK is sorely lacking in gas and will be heavily reliant on imports in all scenarios,” he said.

With energy demand set to persist, Wood Mackenzie said new projects were compatible with the UK government’s target of reaching net zero by 2050.

“But while UK oil and gas has lower carbon intensity than some alternatives, high prices look set to extend output from late-life infrastructure, meaning emissions reduction goals will become harder to meet,” Boroujerdi pointed out.

“Continued decarbonisation of the shelf – including electrification – is required to ensure alignment between energy security and a net zero future,” he added.

Exploring UK shale, however, was not the answer. “In-place volumes may appear big, but public opposition, population density, infrastructure, land access, flow rates and low recovery rates all limit its commercial impact,” Boroujerdi explained.