Ukraine-Russia: ‘Good case’ for more North Sea oil and gas developments to protect UK supply, says expert

There is a good case for allowing more oil and gas developments in the North Sea to protect the UK's security of supply, a leading expert has said.

Alex Kemp, professor of petroleum economics at the University of Aberdeen, said the war in Ukraine had "changed everything completely".

The UK and the US jointly announced yesterday they would be banning the import of Russian oil and related products by 2023 as the allies looked to pile further economic pressure on President Vladimir Putin.

Business secretary Kwasi Kwarteng said the nine-month delay until impact meant the fuel sector and other firms would have “more than enough time to replace Russian imports”.

Picture: Andy Buchanan/WPA pool/Getty Images

The EU is also aiming to slash its reliance on Russian gas in a bid to punish Mr Putin's regime.

Consumers are now braced for further hikes in petrol prices and bills.

Speaking to The Scotsman before the announcements, Prof Kemp said there was a danger that supply would become so short heading into next winter "that things could be very tough indeed".

However, he said new North Sea fields should meet environmental thresholds.

Boris Johnson previously suggested the UK could increase its domestic gas and oil production following Russia's invasion of Ukraine.

Prof Kemp, director of the Aberdeen Centre for Research in Energy Economics and Finance, said the Prime Minister had raised a "perfectly pertinent" issue.

He said: "Should we not discourage, but encourage the development of more of our gas fields?

"We have quite a few gas fields which are coming up for development, if they get development approval."

He added: "If these gas developments went ahead, what would they do? They wouldn't have much effect on the price, but they could increase security of supply to the UK.

"And there is a danger that supply will become so short over the course of this year, getting into this coming winter, that things could be very tough indeed."

Prof Kemp said: "My view is that there is a case for allowing the development of more gas fields, but on the condition that they pass a threshold test about the emissions relating to the production process."

He said authorities would have to be satisfied that "serious emission reduction schemes are being enforced", adding: "Given that, then there's a good economic case for allowing more North Sea gas developments and even oil as well."

Prof Kemp said this would see extra orders flowing into the supply chain, boosting employment in the north-east.

He said: "Looking at it from a straight economic point of view, given the outlook there is a case for permitting, on security of supply grounds, more North Sea fields which satisfy the conditions of keeping the emissions down, say by electrification of their power, rather than using diesel or gas in the platforms."

Prof Kemp said Western Europe gets around 40 per cent of its gas supply from Russia, although the UK only imports a small amount of Russian gas.

However, as the UK imports more than half of its overall gas needs, it would be affected by "a scramble for gas from other sources, like Norway".

"We could have a security of supply problem," Prof Kemp said. "Politicians, above all, the idea that they will have to cut off houses reliant on gas supply in late winter, that's really one of the nightmares of politicians."

Industry statistics show there are around 4.4 billion barrels of proven oil and gas reserves in the North Sea where the necessary kit is in place to extract it.

Ross Dornan, market intelligence manager at Offshore Energies UK (OEUK), formerly Oil and Gas UK, said exploration had been at "record low levels in recent years, however there are still significant quantities of oil and gas in the UK which are still to be discovered".

He said: "An increase in new activity offshore would ensure that new projects are progressed in order to support our contribution to domestic energy security.

“At current rates of investment, production levels will continue to decline at a faster rate than demand will and it is likely that reserves will be left undeveloped."

Mr Dornan said oil and gas currently accounts for 75 per cent of UK energy use.

He said there was the potential to limit reliance on imports to around 50 per cent of supply over the next decade, "provided we open up new fields".

Russell Borthwick, chief executive of Aberdeen and Grampian Chamber of Commerce, said: “North Sea oil and gas will remain an essential part of the UK’s energy mix in the transition to net zero over the coming decades.

“This was the case before Russia’s invasion of Ukraine, and the current crisis further underlines just how crucial domestic supplies are for our energy security."

It came as SNP energy secretary Michael Matheson insisted Scotland’s energy supply was secure and Russian gas imports could be easily replaced with other sources.

He was responding to calls from the Conservatives for the Scottish Government to reconsider its position on North Sea oil and gas in light of the war in Ukraine and concerns about the supply of gas to Europe.

Speaking in the Scottish Parliament, Mr Matheson reiterated the Government’s position that unlimited extraction of fossil fuels was not consistent with climate obligations.

He said: “Scotland and the UK as a whole has security of energy supplies as it stands at the present moment.

“It has a very low reliance on importing gas from Russia, apparently around 2 per cent, which could easily be displaced by alternative routes.”

Scottish Greens energy and climate spokesman Mark Ruskell accused the Tories of “wilfully avoiding the scientific evidence and the fact that volatile gas prices are having a devastating impact on the cost of living”.

He said: “Across Europe, governments are waking up to the fact that we must end our dependency on oil and gas.”

Simon Williams, fuel spokesman for the RAC motoring organisation, said another day of record average pump prices was "putting petrol on a rapid journey towards 160p a litre and diesel to 165p".

He said: "Given the speed of increases, drivers could unfortunately see this by the end of the week.

"And as these are averages far higher prices will be appearing on forecourt totems up and down the country."

Howard Cox, of FairFuelUK, said current pump prices were already hurting businesses and motorists.

He said: “The future is grim, with optimistic forecasted oil prices to rise to $150. That will mean pump prices getting closer to £2."

Conor Forbes, head of policy with Advice Direct Scotland, which runs the country’s national consumer advice service consumeradvice.scot, said: “Rising oil and gas costs have an immediate impact for consumers here at the petrol pumps, as well as a knock-on impact on food prices as those transport costs filter through.

“On top of that, we already have household energy prices due to soar from next month, and increased wholesale prices could lead to yet another rise in the energy price cap from October.

“The cost-of-living crisis is already here, and all the signs suggest it is going to get worse, making it very difficult for thousands of Scots households."

Mr Kwarteng announced the UK will phase out the import of Russian oil and oil products by the end of the year.