Failure to secure a future supply of North Sea oil will leave the UK and its European neighbours exposed to 'serious' diesel shocks, a major new report has found.
The research, by PF Global, highlights the strategic importance of the UK’s North Sea oil and gas fields, such as Rosebank, and suggests it should be presented as part of the UK-EU reset talks, given their potential to supply European refineries over the coming decades.
Currently the UK only refines 45% of its diesel needs, with sources filling this gap considered 'not dependable' by the report, leaving Britian exposed to geographical events and export bans.
This was brought into sharp focus in September when President Donald Trump raised the prospect of a possible US diesel export ban; the threat alone caused prices to spike by over £2 per litre.
It also comes after supply chains were hit earlier this year in the Middle East with the crisis around the Strait of Hormuz.
As Britian does not have the reserves or refining capacity to be self-sufficient, the paper suggests the most viable route to improve long-term stability is by building on an existing system with European nations.
This involved maintaining the stable supply of crude oil from the UK North Sea fields, with 86% of exports heading to Northwest Europe for refining and 65% ending up back in the UK as refined product via UK or Northwest Europe refineries.
Should North Sea supplies fall, Northwest European refiners face 'increased supply risks', the research warns, with the UK Continental Shelf (UKCS) providing 10-12% of EU crude supplies.
The closer EU trade routes also reduce journey times, cut transport costs and limit geographic risks, like fuel supply delayed by the Strait of Hormuz closure.
This combination of security and relationship factors is likely to play into the Rosebank decision as the nearest-term addition to the system, expected in coming months.
The paper adds that the 'core case' for increasing future supplies from UKCS is not to provide self-sufficiency, which is neither possible nor practical, but rather providing 'reliability of supply and maximising economic outputs'.
Sam Chivers, Associate Director at PF Global and author of the report, said: 'The global oil trade has been disrupted by the actions of a small number of actors and the impact of these shocks are being felt in households across the globe.
'As geopolitical tensions rise, the UK has a choice: to strengthen its reliable partnership with Europe and mitigate the risks of serious future shocks or to further expose itself to the significant import risks we have seen this past month.
'In both scenarios, the country must continue its energy transition, but approving Rosebank now can provide certainty that the system so dearly needs.'
Professor John Underhill, Director for Energy Transition, The University of Aberdeen said: 'A secure, reliable, and robust supply route to and from Europe for the export of the UK’s domestic oil and reimport of refined petroleum product derivatives matters. The interdependence is vital in helping to protect Europe and the UK from the global turmoil.
'An increased reliance on imports from outside Europe not only affects energy and national security but also carries a higher carbon intensity, something that’s far worse for global emissions and our climate.
'That is why domestic production remains important and development of oil discoveries like Rosebank should be regarded as critical strategic national assets.
'If new projects are allowed, the UK Continental Shelf can remain a crucial and reliable source of oil to the UK-EU system whilst geopolitical tensions are high, supply chains are stressed, and demand for petroleum products remains.'
Source: Aberdeen and Grampian Chamber of Commerce
