Drilling for more oil will not make Britain secure

The government says that new drilling licences are in the interests of self-sufficiency and national security. In reality they are anything but

August 02, 2023
Digging a hole: Rishi Sunak speaking to journalists outside the St Fergus gas plant in Aberdeenshire last month. Image: PA Images / Alamy Stock Photo
Digging a hole: Rishi Sunak speaking to journalists outside the St Fergus gas plant in Aberdeenshire last month. Image: PA Images / Alamy Stock Photo

As he announced more than 100 new North Sea drilling licences in late July, Grant Shapps, the secretary of state for the Department for Energy Security and Net Zero, pledged that “We will power ahead with new oil and gas because it’s in the best interests of the British people, of our economy and of our national security”. Balancing the two seemingly competing demands of Shapps’s department has become a dominant fault line in British politics over the past year and a half.

Tellingly, Shapps emphasised the threat of dependency upon despots as a rationale for granting new licences: “The North Sea is at the heart of our plan to power up Britain from Britain so that tyrants like Putin can never again use energy as a weapon to blackmail us.” 

Shapps was singing from an old hymn sheet. During the 1970s and 1980s, both Labour and Conservative governments relished the chance to enjoy self-sufficiency in hydrocarbons during another period of volatility. Back then it was conflict in the Middle East, rather than in eastern Europe, that helped drive oil prices sky high, sparking worry over supplies in the here and now and into the future. Motorists were issued with ration books in 1973, only to be told they were free to destroy them in 1975.

That was the year that Britain’s first domestically drilled oil landed from the North Sea. Soon giant fields such as BP’s Forties and Shell’s Brent were cumulatively supplying millions of barrels a day. Britain had a brief but significant spell as a major oil economy, among the top five producers as well as being a leading exporter. Giant pipeline systems were built. Incredible feats of engineering took oil from the Brent field through to the Sullom Voe oil terminal on Shetland, then Europe’s largest.

Oil was, and still is, then loaded onto tankers. Gas is piped to St Fergus in Aberdeenshire and subsequently beneath land to the Mossmorran plant in Fife where it is separated into different chemical elements and manufactured into distinct products.

It was at St Fergus that the prime minister, Rishi Sunak, decided to pose for photos last month, as he pledged to keep the site in the energy business through the new drilling licences. He also announced investment in carbon capture and storage technology, which has been long mooted but scuppered by lack of central government funding.

But the story that Shapps and Sunak are telling here is partial. It ignores important features of the world oil and gas industry, of which the British North Sea is but a small and shrinking part.

It is true that self-sufficiency was briefly achieved in the 1970s and 1980s, when what mattered most was the effect of expensive imports on the national balance of payments. The reality now however is that Britain is, and will remain, a net importer of oil.

Today, the UK is around the world’s 19th largest oil producer, but in the future it will likely tumble further down the league. Since its peak around the turn of the millennium, British oil production has fallen by over 70 per cent. The UK share of overall global production was once as high as 5 per cent; now it is 1 per cent.

Another aspect to keep in mind is that oil is not a single product. Brent crude is a gold standard, used as a benchmark price quoted in newspapers around the world. But it’s also a much lighter form of oil, typically becoming gas or diesel compared to the heavy oils from the Middle East, which are more likely to become jet fuel. As the UK remains committed to banning new petrol and diesel cars by 2030, domestic demand for gas and diesel will almost certainly fall, especially so if the government is to meet its net zero targets by 2050.

All this means is that Britain’s net trade balance in oil is minimal when contrasted with its figures for both oil exports and imports. The recent licencing will do little to change that. Neither is Britain especially reliant on Russia. In 2021, it supplied around 5 per cent of British gas and 10 per cent of British oil by value. Compare this to Germany, which—before a rapid transition over the past 12 months—received 34 per cent of its oil and around 55 per cent of its gas from Russia.

Perhaps the biggest folly in the Shapps and Sunak sovereignty ploy is the claim that it is about exerting control over national resources. Their political heroes in the Thatcher administration dismantled the public ownership and oversight of privately owned production that Tony Benn had constructed as Jim Callaghan’s energy secretary. The British National Oil Corporation (BNOC) was privatised not long after being renamed, pointedly, as “Enterprise Oil”. Since then, Conservative governments have also relaxed the levels and stringency of oilfield taxation.

The Norwegians are set to be one of the lead beneficiaries from the latest licencing round, despite the cloak of British national interest. The Rosebank field to the west of Shetland will be exploited by Equinor, the Norwegian equivalent of the BNOC, which remains a national oil company. Rosebank will finance hospitals, pensions and add to Norway’s gargantuan sovereign wealth fund; it will also contribute to global carbon emissions. It will be of minimal benefit to British energy security.