Oil and gas industry in the United Kingdom

The oil and gas industry plays a central role in the economy of the United Kingdom. Oil and gas account for more than three-quarters of the UK's total primary energy needs. Oil provides 97 percent of the fuel for transport, and gas is a key fuel for heating and electricity generation. Transport, heating and electricity each account for about one-third of the UK's primary energy needs. Oil and gas are also major feedstocks for the petrochemicals industries producing pharmaceuticals, plastics, cosmetics and domestic appliances.

Although UK Continental Shelf production peaked in 1999, in 2016 the sector produced 62,906,000 cubic metres of oil and gas, meeting more than half of the UK's oil and gas needs. There could be up to 3.18 billion cubic metres of oil and gas still to recover from the UK's offshore fields.

In 2017, capital investment in the UK offshore oil and gas industry was £5.6 billion. Since 1970 the industry has paid almost £330 billion in production tax. About 280,000 jobs in the UK are supported by oil and gas production. The UK oil and gas supply chain services domestic activities and exports about £12 billion of goods and services to the rest of the world.

Overview The oil and gas industry in the United Kingdom produced 1.42 million BOE per day in 2014, of which 59% was oil/liquids. In 2013 the UK consumed 1.508 million barrels per day (bpd) of oil and 2.735 trillion cubic feet (tcf) of gas, so is now an importer of hydrocarbons having been a significant exporter in the 1980s and 1990s.

98% of production comes from offshore fields and the services industry in Aberdeen has been a leader in developing technology for hydrocarbon extraction offshore. Historically most gas came from Morecambe Bay and the Southern North Sea off East Anglia and Lincolnshire, but both areas are now in decline. Oil comes mainly from the North Sea Central Graben close to the median line with Norway in two main clusters – around the Forties oilfield east of Aberdeen and the Brent oilfield east of Shetland. There have been recent discoveries in challenging conditions west of Shetland. there were of pipelines linking 113 oil installations and 189 gas installations. The only major onshore field is Wytch Farm in Dorset but there are a handful oil wells scattered across England. There is significant shale potential in the Weald and in the Bowland Shale under Lancashire & Yorkshire, but only a few wells have been drilled to date.

The UK's strengths in financial services have led it to play a leading role in energy trading through markets such as ICE Futures (formerly the International Petroleum Exchange). The price of Brent Crude from the British North Sea remains the major benchmark for the international oil trade, and the National Balancing Point market is the benchmark for most of the gas traded across Europe. The difficult offshore conditions make the UK a high-cost producer; in 2014 the average development cost was $20.40/boe and the operating cost was $27.80/boe for a total of $48.20/boe. In 2014 the industry spent £1.1bn on exploration, £14.8bn on capital investment and £9.6bn on operating costs. Fields developed since 1993 are taxed through an additional corporation tax on profits, in 2014 the industry generated £2.8bn in direct taxes.

Current status Combined oil and gas production volumes in the UK were 1.3 million BOE/day in 2021 and 2022, of which 60% was oil and 40% natural gas production.

Early history

After the Scottish shale oil industry reached its peak in the 19th century, the British government became increasingly concerned to find secure sources of fuel oil for the Royal Navy. This led to a nationwide search for onshore oil during the First World War and a modest discovery of oil at Hardstoft in Derbyshire.

The UK relied on imports of fuel from the United States and the Middle East. Imports in the period 1912 to 1919 were as follows. +UK petroleum imports, 1912 to 1919UK import 1912Port of London import 1913Port of London import 1919Oil typeImport m3Value £/m3Import m3Value £/m3Import m3Value £/m3Crude oil51.04.45––––Lamp oil665,3531.54317,6183.67284,5349.13Petroleum spirit379,8723.45318,9558.06575,07717.32Lubricating oil301,8352.31119,5427.92145,22222.58Fuel oil217,8640.89215,6912.73189,7726.00Gas oil333,8451.15–––– The country's oil resources were nationalised by the Petroleum (Production) Act 1934 (24 & 25 Geo. 5. c. 36), and a fresh attempt was made to find oil on the UK mainland. The outbreak of World War II accelerated this search and led to a number of wells being drilled, primarily around Eakring in the East Midlands near Sherwood Forest. During World War II over 300,000 tons of oil or 2,250,000 barrels was produced by 170 pumps; and production continued until the mid-1960s. Viable oil extraction also occurred at D'Arcy, Midlothian with 30,654 barrels of oil produced in the period 1937–1965.The Search for Natural Petroleum in the Lothians, by Alastair C Bagnall, Oil Exploration (Holdings) Ltd, Edinburgh; in The Edinburgh Geologist, March 1979, publ.by Edinburgh; pp. 12-13 Geological Society edinburghgeolsoc.org/eg_pdfs/issue05_full.pdf - retrieved Nov 2023

In the 1950s, the focus turned to southern England where oil was discovered in the Triassic Sherwood Sands formation at , followed by the development of the Wytch Farm oilfield. The link between onshore and offshore oil in the North Sea was made after the discovery of the Groningen gas field in The Netherlands in 1959.

Exploration and appraisal Drilling Since 1965, 3,970 exploration and appraisal wells have been drilled offshore on the United Kingdom Continental Shelf. In 2014, 104 new wells and 54 sidetracks were drilled.

Over four decades since the 1960s, the industry has spent £58 billion by 2008 (equivalent to £ billion in ) on exploration drilling. In 2008, £1.4 billion was spent finding new oil and gas reserves.

Discoveries In 2008, of oil and gas equivalent (BOE) were discovered. The average size of the oil and gas fields discovered between 2000 and 2008 was 26 million BOE, compared with an average of 248 million BOE in the ten years from 1966.

In 2014, between 2.2 to 4.4 to 8.6 billon barrels worth of oil embedded in oil shale was discovered in the Weald Basin, although it is unlikely to be recoverable.

Production

In 2008, the UK was the 14th largest oil and gas producer in the world (10th largest gas producer and 19th largest oil producer). In Europe the UK is second only to Norway in oil and gas production. As of 2024 crude oil and condensate production declined to 630,000 barrels per day. As per NSTA projection, crude oil and condensate production is on track to decline to 420,000 barrels per day by 2030. 1500 oil wells will come up for decommissioning between 2026 and 2030.

Oil and gas production from the UK sector of the North Sea peaked in 1999, but the UK remains a substantial producer today. Over the last four decades, 39 billion BOE have been extracted on the UK Continental Shelf (UKCS). In 2008, the combined production of oil and gas was 1 billion BOE ( of oil and 68 billion cubic metres of gas). This represented a fall of 5% compared with 2007 (6% oil and 3% gas), a slight improvement on the decline rate in 2002-2007 which averaged 7.5% per annum.

Role in supplying energy to the UK As of 2008, just over three-quarters of the UK's primary energy demand was met by oil and gas. In 2008, oil produced on the UKCS satisfied almost all domestic consumption (97%) while gas produced in the UK met about three quarters of demand. In 2020, it is estimated that 70% of primary energy consumed in the UK will still come from oil and gas, even upon achievement of the government's target to source 20% of energy from renewable sources. This will be a combination of oil and gas produced domestically and imports. In 2008, the UKCS was estimated to have the potential to satisfy 40% of the UK's oil and gas demand in 2020, if investment was sustained.

Associated expenditure Over four decades to 2008, a total of £210 billion (2008 money, equivalent to £ billion in ) has been invested in developing new resources. In 2008, this figure was £4.8 billion, a 20% decrease since 2006. An additional £147 billion (2008 money) has been spent on producing the oil and gas and in 2008, operating costs were £6.8 billion (equivalent to £ billion in ), an increase on 2007. The development cost of some of the early UK North Sea oil fields are shown in the table: +Development costs of early North Sea oil fieldsFieldProduction startDevelopment cost $ millionPeak production 1,000 barrels/day$/barrel/dayArgyll197570701,000Forties19751,4605002,900Auk1975135801,700Piper19767503002,500Montrose1976250604,100Beryl19768001008,000Brent19763,6004608,000Claymore19775401703,200Thistle19771,0002005,000Dunlin19789601506,400Ninian19782,1003605,800Heather1978450509,000Cormorant19797406012,300Tartan1979430855,100Buchan1979200504,000Murchison19807251206,000Total 14,2102,8155,000 (mean)

Tax contribution Oil and gas production from the UKCS has contributed £271 billion (2008 money) in tax revenues over the last forty years. In 2008, tax rates on UKCS production ranged from 50 to 75%, depending on the field. The industry paid £12.9 billion in corporate taxes in 2008–9, the largest since the mid-1980s, because of high oil and gas prices. This represented 28% of total corporation tax paid in the UK. It is expected that tax revenues from production will fall to £6.9 billion in 2009-10 based on an oil price of $47 per barrel, providing 20% of total corporation taxes. In addition to production taxes, the supply chain contributes another £5-6 billion per year in corporation and payroll taxes.

Gas and oil infrastructure

A schematic overview of the sources, flow, infrastructure, processes and export routes of UK oil and gas is shown on the schematic, adapted from. Further details are given in the following tables. The infrastructure used to transport gas from offshore gas fields to the gas National Transmission System is shown in the table below.Operating Company Fact Sheets (various) This includes import routes of gas from other sources.