Iran Conflict and Rising Energy Prices: What Difference Would the North Sea Make?

Among the many consequences of the current conflict in the Middle East has been the sharp rise in the price of oil and gas, leading to fears that it will lead to higher UK energy costs. This briefing looks at the diminishing role of the North Sea in providing the UK with an affordable energy supply and our growing dependency on gas imports, regardless of new drilling. 

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In Brief  

• The central energy issue in the UK today is around affordability, yet increasing domestic oil and gas production makes no difference to UK energy bills as it is too small to influence global prices.
  
• But neither will the North Sea  provide security of supply – after 50 years of drilling the UK has burned most of its gas. The UK’s reliance on imported gas is set to rise from 55% today to more than two-thirds dependent by 2030, and over 90% dependent on gas imports by 2050 - even if new North Sea fields are developed. 
• The most secure energy system is one that relies on homegrown renewable energy – the price of which is far less impacted by global conflict – and where energy demand is cut by properly insulating homes. Focusing on oil and gas drilling will only lead to higher prices for longer. 

North Sea production does not impact UK energy bills. 

The central energy issue in the UK today is around affordability, with millions of  households still struggling to heat their homes and businesses impacted by high costs nearly five years into the energy crisis.

More domestic oil and gas production makes no difference to UK energy bills. North Sea output is too small to influence global prices, and reserves are owned by oil and gas companies who sell them to the highest bidder at international market prices. In 2023, during the energy crisis, then Conservative Energy Secretary, Claire Coutinho, admitted that new drilling would not bring bills down.

The UK is particularly exposed to volatile fossil fuel markets, with the cost of gas setting the price of electricity the majority of the time. Russia’s war with Ukraine, which saw much larger spikes in energy prices than today, led to UK consumers paying an estimated additional £183 billion in excess energy costs, severely damaging people’s finances and the UK economy.

The UK has burned through most of its gas.  ‍

After 50 years of drilling, the North Sea is a hyper-mature basin with just a small fraction of UK gas reserves remaining. Most of what is produced is oil, 80% of which the UK exports. 

According to official projections, based on expected development activity – even if new North Sea fields are developed – the UK’s reliance on imported gas is set to rise from 55% today to more than two-thirds dependent by 2030, and over 90% dependent on gas imports by 2050, due to the declining basin.^*‍

Opening new oil and gas fields makes almost no difference to UK dependency on gas imports. Jackdaw, one of the biggest undeveloped gas fields, if approved, would reduce our annual gas import dependency by just 2% on average; and the controversial Rosebank field, whose reserves are primarily oil destined for export, has the potential to reduce annual gas import dependency by just 1% on average.^*

Issuing new exploration licenses would also have almost no impact on the amount of gas we will need to import to meet our needs. New exploration licences could reduce gas import dependency in any given year by around 1-5%.^*‍

The previous government’s policy of ‘maximising’ the extraction of oil and gas has made little difference to UK gas supply. Research shows that new fields licensed over the 14 years of Conservative government have produced just over a month’s worth of gas to date, and have the potential to produce – in total, over their lifetime – less than six months of UK gas demand.

The idea that new drilling – whether through more licensing or new field developments – will alter this trajectory runs counter to reality. That’s a geological fact, not a political choice.

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Getting off the rollercoaster of volatile fossil fuels.

‍The most secure energy system is one that relies on homegrown renewable energy – the price of which is far less impacted by global conflict – and where demand is cut by properly insulating homes.

Thankfully, in the UK renewable energy already provides nearly half of our electricity needs – more than any other source – with gas now making up less than a third. And the government’s new £15bn Warm Homes Plan has the potential to cut energy waste and bills, particularly for low-income households. 

The only lasting way to protect households is to cut gas demand by investing in insulation and renewables. Focusing on oil and gas drilling will only lead to higher prices for longer.

* The methodology for calculating UK gas import dependency can be found here.

Uplift media contact: Holly McElhone: holly.mc@upliftuk.org; 07360651711