Economic Report 2020

The oil and gas industry’s role in supporting UK energy security

Energy security can be defined as ensuring the economy has reliable access to energy at a stable and affordable price. Supporting UK energy production as part of a diverse range of energy sources is critical for both economic contribution and security of supply. From the UK perspective, as a mature production basin and a net importer, this means maximising the use of indigenous resources and minimising reliance on net imports to meet domestic energy demand. Along with this, increasing environmental considerations mean that it is beneficial to have a strong domestic energy supply which can be controlled, regulated, and governed appropriately. In 2019, the UK’s net energy import dependency was just over 35 per cent of total energy consumption. As an economy, the UK spent £19 billion 30 on crude oil and £6.6 billion on natural gas imports alone, 17 per cent less than 2018 (£30.7 billion). The cost of imports is directly linked to both demand and commodity pricings and the year-on-year decline seen here is based on a reduction in both of these factors. Net energy imports accounted for 5 per cent of the total UK imports spend in 2019, compared with 7 per cent in 2018. However, consumption was 1.5 per cent 31 lower in 2019 than in 2018, meaning import spend was proportionally in line across both years. The largest elements of UK energy imports consist of

pipeline gas, LNG and net imports of crude oil to support the deficit between demand and production. Last year, domestic gas production supported just under half of UK gas demand, with the remainder being imported from overseas. 57 per cent of the UK’s total gas imports in 2019 were from Norway, with the majority of this being through the Langeled pipeline. 32 So far in 2020, Norwegian supply has fallen to 48 per cent of imports mainly due to maintenance outages. The remaining demand balance is made up from interconnectors with continental Europe and LNG imports. Last year total LNG imports increased by 157 per cent, with the largest source of UK LNG imports being Qatar (49 per cent of LNG supply in 2019). 33 As well as the economic cost of these imports, offsetting the benefits of UK gas production, there is also a significant impact on carbon emissions, as LNG has over twice the carbon intensity of domestically produced gas. 34 Maximising our ability to support energy security domestically enables greater accountability with regards to emissions from energy production, and industry is taking responsibility for these emissions through the ambitions in Roadmap 2035 35 and sector-leading production emission reduction targets. 36

30 https://www.ons.gov.uk/economy/nationalaccounts/balanceofpayments/bulletins/uktrade/march2020 31 https://oilandgasuk.cld.bz/OGUK-Business-Outlook-2020-Markets-Investments/4/ 32 https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/938018/ET_4.3_NOV_20.xls 33 https://www.gov.uk/government/statistics/gas-section-4-energy-trends 34 https://www.ogauthority.co.uk/news-publications/news/2020/north-sea-gas-has-lower-carbon-footprint-than-imported-lng/ 35 https://www.roadmap2035.co.uk/ 36 https://oilandgasuk.co.uk/product/production-emissions-targets-report/

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