OEUK Briefing: Global developments and UK energy considerations

Enrique Cornejo, OEUK's Energy Policy Director comments:

"Our first thoughts are with all civilians and those in military service and their families affected by the ongoing conflict across the Middle East. This includes over 300,000 UK nationals, many of whom work in offshore energy and began their careers in the North Sea.

"These events underline that energy security is national security, and UK production of domestic oil and gas is a vital strategic asset alongside renewables. Even in the face of these events, some will still say we must abandon our own resources. But the reality is we need oil and gas for decades to come, and we should make the most of our own, rather than ramping up our reliance on imports.

"Domestic oil and gas production is essential for UK energy and national security. It is more reliable, less carbon-intensive than imported LNG, and far less vulnerable to geopolitical disruption and secures billions of pounds in economic value and thousands of jobs at home."

Background briefing

Why domestic oil & gas still matter as we build out renewables:

The UK needs oil & gas for decades to come

• 75% of the UK's total energy still comes from oil and gas.
• Electricity is only one third of total energy use. 24 million homes rely on gas for heating and hot water
• Even in a net zero compliant pathway, the UK will need 10-15bn barrels of oil and gas to 2050. It is currently on track to produce just 4bn barrels in this timeframe
• With competitive and stable tax and licencing policies the UK could produce half of the oil and gas it needs to 2050
• Domestic gas has far lower emissions than LNG imports, which are four times more carbon intensive and have to be shipped across global waters
• Domestic production meets around half of UK demand today and keeps pipelines, terminals and onshore infrastructure viable.
• When domestic output drops, the UK simply imports more LNG and more refined products - exposing consumers to global crises, freight disruption and international competition for cargoes.

UK's Current Gas Supply & LNG Breakdown:

Latest figures based on 2024 supply mix (Source: DESNZ)

• 43% - UK Continental Shelf
• 43% - Norway
• 14% - LNG imports

LNG's strategic role
LNG is essential for flexibility, not a replacement for domestic output.
Under a high import future, LNG could reach 46% of supply by 2035.
Under a domestic priority scenario, LNG reliance could fall to 6%.
UK LNG terminals: Isle of Grain, South Hook, Dragon.

Storage matters
EU storage: ~105 bcm

UK storage: ~0.9 bcm
This means the UK depends on steady domestic flows and Norwegian pipelines, not large seasonal storage.

Oil: Why exports of UK oil and gas don't undermine energy security

UK crude is mostly exported because UK refineries are specialised. It is part of a larger European network of refineries which supports UK and European security, reducing dependency on OPEC/Russia.

The UK then imports the refined products it needs (such as diesel, jet fuel, petrochemicals).
Domestic oil production supports jobs, supply chains, taxes and infrastructure regardless of whether crude is refined here or in Europe.

OEUK analysis - what these events mean for prices and why domestic supply matters

OEUK does not forecast prices. But we can clearly explain, using our security of supply evidence, how import dependence translates global shocks into UK volatility.

Why oil and gas prices jump in global crises

Supply risk premium
Markets price in the possibility of supply loss long before any physical barrels disappear. Hormuz instability is one of the most serious triggers for a global repricing event.

LNG shipping disruption
LNG cargoes face delays, diversions, higher insurance costs and reduced availability. The UK competes in a global market for these same cargoes.

Asia's ability to outbid Europe
During disruption, Asian buyers (China, Japan, South Korea) secure supply first - often driving European prices sharply upwards.

Low UK storage means price volatility passes through quickly
With only 0.9 bcm of storage and loss of domestic capability, the UK cannot buffer shocks the way Europe can.

Conclusion: Even short-lived instability in the Middle East immediately affects the UK because imported oil and gas are priced on global benchmarks.

Why domestic production protects the UK in these situations

Today, around 200,000 direct, indirect and induced jobs and more than 400 supply chain companies are dependent on continued domestic oil and gas activity. However, recent policy uncertainty and frequent changes in fiscal and regulatory frameworks have directly contributed to reduced investment, capital flight, and a decline in domestic production, with skilled workers and projects increasingly moving overseas.

Less LNG exposure = less volatility
If the UK needs fewer LNG cargoes, it becomes less dependent on:
geopolitical flashpoints including tanker delays, freight disruption, competition from Asia and risk premium spikes.

Domestic production keeps critical infrastructure alive
St Fergus and Teesside handle up to half of UK gas flows. Low domestic throughput risks: Premature closure of pipelines/terminals; reduced flexibility; higher cost of moving imported gas around the country; more vulnerability during winter stress events

Domestic gas is lower carbon and lower risk than imported LNG
UK gas: 28 kgCO₂e/boe / LNG: 85 kgCO₂e/boe

The UK therefore cuts emissions AND import risk by producing more oil and gas at home.

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