High commodity prices and Russia’s invasion of Ukraine have called into question the UK’s reliance on energy imports, with the UK government recently unveiling a new energy security strategy in response. In its latest analysis, Wood Mackenzie examines the levers the North Sea can pull to increase production and argues indigenous oil and gas still has a major role to play. 

According to the market analyst, UK demand for oil and gas will continue to outstrip supply but there are wide ranges of uncertainty. It forecasts that in 2030, production will be between 0.6mn boe/d and 1.6mn boe/d, while the range for demand will be even wider. 

Neivan Boroujerdi, Research Director, North Sea Upstream for Wood Mackenzie, says: ‘By 2050, UK North Sea production will have largely ceased. But even in a net zero scenario, demand will persist, with emissions being offset by carbon capture and storage (CCS) and nature-based solutions. Current levels of production could be maintained for the next decade, underpinning energy security and safeguarding jobs. But the UK is sorely lacking in gas and will be heavily reliant on imports in all scenarios.’

The report sets out five levers to boost production: 

• Execution – The near-term focus should be on increasing uptime and executing under-development projects that are set to deliver over 0.2mn boe/d. 
• New greenfield projects – These could deliver 2bn boe; Cambo and Rosebank are ‘sanction-ready’, while others require finance or a change in ownership.
• Increasing recovery from existing assets – This could unlock upside of over 1bn boe. Early-life assets like Clair and Culzean have the biggest impact, but ultra-mature fields can deliver too.
• Exploration – Existing plays can deliver another 2bn boe of resource; unproven plays could offer even more. The impact on gas could be pronounced. 
• Contingent resource – Some 4bn ‘disadvantaged’ boe is unlikely to be developed. However, area-wide solutions to themes like heavy oil could make a difference.

If all economically viable resources were to be produced, this could deliver 5bn boe of new volumes and $60bn of investment, suggests the report.

‘While the industry has been provided a lifeline, it needs to step up. All stakeholders need to promote a culture of transparency, and a streamlined – and stable – regulatory and commercial environment,’ Boroujerdi says.

Net zero goals under scrutiny 

Boroujerdi adds: ‘With demand set to persist, new developments are compatible with the UK government’s target of reaching net zero by 2050. But while UK oil and gas has lower carbon intensity than some alternatives, high prices look set to extend output from late-life infrastructure, meaning emissions reduction goals will become harder to meet. Continued decarbonisation of the shelf – including electrification – is required to ensure alignment between energy security and a net zero future.’

Wood Mackenzie asserts that UK shale is not the answer. Boroujerdi explains: ‘In-place volumes may appear big, but public opposition, population density, infrastructure, land access, flow rates and low recovery rates all limit its commercial impact.’