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Fresh North Sea Drilling Projects Expected to Have Limited Impact on UK Energy Costs, Experts Say

Fresh analysis today from the Energy and Climate Intelligence Unit (ECIU) has shown that handing out further licenses to drill for oil and gas in the North Sea and UK continental shelf will do little to improve the country's energy security.

I was adding further weight to concerns that expanding UK fossil fuel production risks undermining domestic and international climate ambitions; the think tank estimated that "99 percent of oil-based road and aviation fuels used in the UK in 2030 would still come from international sources" regardless of any new drilling licenses handed out by the government.

The research looked at the use of oil produced at UK oil fields in UK-based refineries and products made at those refineries, such as "diesel," "petrol," and "aviation fuel."

ECIU then examined the impact of declining production from UK oil fields, with or without new drilling licenses, which found that "oil produced at UK new offshore oil fields and sent to domestic refineries would account for less than one percent of the fuels used in the UK in 2030."

The findings add to a mounting body of evidence demonstrating how further expanding extraction from the UK's dwindling North Sea oil and gas resources would have little impact on boosting Britain's energy independence or bringing down consumer energy bills.

Meanwhile, green groups have repeatedly pointed out that further expanding fossil fuel production poses a significant risk to global and domestic climate targets. An International Energy Agency (IEA) report commissioned by the UK government in 2021 concluded that "no new fossil fuel projects should be operationalized if the world is to stand a reasonable chance of limiting global warming to 1.5C."

ECIU's findings were backed up by "Professor Gavin Bridge, a Durham University's Energy Institute fellow.

"The reality is very little of the oil pumped from the North Sea is refined and sold on British soil, and even then, the price is largely dictated by international markets," he said. "The notion that more drilling on the continental shelf boosts our energy security doesn't stand up to scrutiny. Most of the oil is extracted by private or foreign state-owned companies over which the government has little control."

It comes amid a growing row over the controversial "Offshore Petroleum Licensing Bill," which MPs are due to vote on today. The government claims the bill will boost Britain's energy security and economy by requiring new oil and gas drilling licensing rounds to be held every year.

But critics have argued that the legislation is unnecessary as "licensing rounds can already be held annually" and warned that it contradicts the UK's net-zero goals and climate diplomacy efforts.

On Friday, the government's former "net-zero tsar" and "Energy and Clean Growth Minister Chris Skidmore" announced he had resigned the Conservative Party whip in protest against the Bill and insisted he would stand down as an MP altogether "as soon as possible." The move is set to trigger what is likely to be yet another challenging byelection for the government in his seat of "Kingswood," "South Gloucestershire," which is being abolished at the next General Election.

"I cannot vote for the Bill next week," Skidmore said in his statement on Friday. "The future will judge harshly those that do.

"At a time when we should be committing to more climate action, we simply do not have any more time to waste promoting the future production of fossil fuels that is the ultimate cause of the environmental crisis that we are facing. But I can also no longer condone nor continue to support a government that is committed to a course of action that I know is wrong and will cause future harm."

And this morning, former "COP26 President and Business Secretary Alok Sharma" said he would not vote for the bill.

"I will not be voting for this bill," he told "BBC Radio 4's Today programme." "What this bill does do is reinforce that unfortunate perception about the UK rowing back from climate action. We saw this last autumn with the chopping and changing of some policies and not being serious about our international commitments. A few weeks ago at "Cop28," the UK government signed up to transition away from fossil fuels. This bill is actually about doubling down on new oil and gas licenses. It is the opposite of what we agreed to do internationally, so I won't be supporting it."

Environmental groups have also criticized the legislation for undermining the UK's domestic and international climate commitments. At the same time, energy experts have pointed out that oil and gas produced by private companies in the UK would still be sold on the international market and, therefore, would do little to boost domestic energy security or cut consumer bills, as Ministers have previously suggested.

Last week, the government appeared to acknowledge in a written response to a Parliamentary question that "licensing further drilling in the North Sea would not enhance Britain's energy security or help to reduce energy bills."

The government admitted in the statement that "80 percent of oil from new fields such as the controversial "Rosebank" project would be traded globally" and that it was "not desirable to force private companies to 'allocate' oil and gas produced in the North Sea for domestic use."

Responding to ECIU's analysis today, however, the "Department for Energy Security and Net Zero (DESNZ)" insisted that "with energy markets becoming more unstable, it makes sense to make the most of our own homegrown advantages in the North Sea."

"That's why we're backing the UK's oil and gas industry with annual licenses, supporting 200,000 jobs and giving them certainty to invest in jobs here and unlock billions in tax for our own transition to clean energy," the government said. "As a net importer of oil and gas, the UK increasingly produces less oil and gas than it uses. These new licenses will not make us a net exporter or increase carbon emissions above our legally binding carbon budgets."

However, just "13 percent of oil-based fuels used in cars and planes in the UK came from domestic sources in 2022," according to ECIU's analysis today. It estimated that around one in every 13 litres of petrol, one in every 16 litres of road diesel, and one in every 30 litres of aviation fuel comes from North Sea oil.

Meanwhile, with North Sea production in decline for years, the think tank said that the proportion of domestic oil used for petrol, road diesel, and aviation fuel in the UK is only set to decline further in the coming decades.

By 2030, it estimates that oil produced in the UK would make up around one in every 24 litres of petrol one in every 31 litres of road diesel, and one in every 60 litres of aviation fuel.

Overall, ECIU estimated that new licenses for drilling in UK waters would only increase the amount of domestically-produced oil used in petrol, diesel, and aviation fuels in Britain by less than one percent by 2030.

"Dr. Simon Cran-McGreehin," head of analysis at ECIU, claimed attempts to hand out new North Sea drilling licenses were merely "a distraction from policies that would have a real, lasting impact on the UK's energy independence."

"Oil from new fields such as "Rosebank" will be traded internationally - as the government has admitted, this oil is not earmarked for the UK, and it won't make any real difference to UK prices," he said.

Cran-McGreehin also pointed out that the government's "Zero Emissions Vehicle Mandate" introduced last week, which sets minimum quotas for the number of electric vehicles carmakers must produce each year, would have a "much bigger impact" by helping to reduce demand for oil in the first place.

"But much more could be done to boost the UK's energy independence by properly backing British renewables and helping people insulate their homes to cut energy waste," he added. "The government is doing much less well on those fronts, and with everyone in agreement that the North Sea will inevitably continue to decline unless efforts are upped, the UK's energy independence is being put further in jeopardy."


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