UK must back domestic oil and gas alongside renewables to secure energy supply

The UK will continue to need significant volumes of oil and gas for decades to come, even with accelerating use of renewables, according to the OEUK Business Outlook Report 2026 on the UK's offshore energy system.

The report published today, warns that without more domestic production the UK risks becoming increasingly reliant on energy imports at a time of rising global instability. Greater import dependence exposes households and businesses to greater volatility, higher emissions and growing geopolitical risk.

Offshore wind, carbon capture and hydrogen production will have expanding roles, but oil and gas still supply around 75% of the UK's energy needs today and are expected to meet around one fifth of demand in 2050. Maintaining domestic supply is therefore essential for energy security, affordability and reliability.

The report shows that domestic oil and gas production brings clear advantages over imports. North Sea gas has a lower emissions footprint than Liquified Natural Gas (LNG) from overseas, and it supports high value- jobs and supply chains and reduces exposure to volatile global markets.

Current projections suggest the UK could rely on imported LNG for more than a quarter of its gas supply by 2030 and almost half by 2035, up from around 14% last year. This trajectory is not inevitable. OEUK analysis shows that with the right investment conditions and support for pragmatic energy policies LNG reliance can fall to 6% in the same year.

Regulatory and fiscal uncertainty rather than resource availability is accelerating decline in domestic production and overall business confidence. Replacing the temporary Energy Profits Levy in 2026 with the permanent Oil and Gas Price Mechanism could unlock up to £50bn of additional capital investment in oil and gas, adding substantially to domestic supplies and increasing tax receipts over the next decade, while strengthening national energy security.

Beyond oil and gas, the Outlook highlights major offshore investment opportunities across multiple energy sources. Under the current fiscal and regulatory regimes, the UK's offshore energy sector is likely to see capital expenditure of around £120bn over the next 10 years, including £86bn in offshore wind, £17bn in oil and gas, and £20bn across carbon capture and storage and hydrogen. With supportive fiscal and regulatory regimes, alongside continued allocation rounds for renewables this spend could be even greater.

Demand for electricity is expected to rise significantly in the coming decade, driven by the electrification of transport, heating and industrial processes, alongside the potential expansion of data centres. The pace of this change will depend on how quickly new technology is adopted but the Business Outlook report shows electricity demand is likely be two and a half times greater by 2050.

Crucially, the report argues that many of the skills, expertise, and supply chains required for the energy transition are rooted in the UK's offshore oil and gas sector. These shared skills and supply chains provide the UK with a strong platform for cross sector collaboration. With the right policy stability, they can be mobilised to deliver both energy supply and security now and for the future.

David Whitehouse, chief executive of Offshore Energies UK, says:

"This is not an either renewables or oil and gas scenario. We urgently need greater supplies of secure, domestically produced energy including oil and gas, which will remain a critical part of the UK energy system and economy for decades. As demand rises and electricity use accelerates, weakening domestic supply would only increase our reliance on imported LNG, leaving consumers more exposed to global volatility and higher emissions.

"Recent events have shown how quickly energy markets can tighten and how easily cargoes can be diverted away from the UK when other buyers bid higher. Energy security means backing homegrown oil and gas alongside renewables.

"To unlock investment, the UK needs a permanent tax regime that gives confidence to investors while protecting taxpayers when prices spike. The government's proposed Oil and Gas Price Mechanism provides that balance.

"Implementing it is essential to reduce reliance on volatile imports, protect skilled jobs and supply chains and ensure the UK can decarbonise while keeping energy secure and affordable."

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