Cost of a crisis: UK energy net import costs have increased 5-fold and could surge again if companies face further windfall taxes, warns Offshore Energies UK

The UK faced a £39 billion net import bill for oil, gas, and electricity between January and September this year – a five-fold increase over the same period last year, according to the latest government trade statistics.

The money flowed abroad to buy the gas, petrol and diesel needed to keep the UK’s homes warm, its vehicles on the road, its businesses running, and for generating electricity. Details are contained in the latest import and export statistics released by the UK government on Friday.

The data has prompted Offshore Energies UK (OEUK) to warn that further import cost surges could follow, especially if windfall tax increases deter investment and so make the UK more reliant on imported energy.

[The statistics also show that the UK is still having to import energy from Russia. In September, the latest month for which figures are available, the UK imported £2 million-worth of Russian oil, a figure confirmed in a House of Commons Library report issued on Saturday (Nov 12). It said: “Overall energy imports from Russia in the year to September 2022 were £3.68 billion.”]

The UK, like many countries, routinely imports and exports energy to manage supply and demand, but domestic gas production plays a particularly important role in reducing reliance on imports. This is especially relevant at times when global demand is high and therefore costs for European gas and international sources of Liquefied Natural Gas are higher.

While the UK has been a net importer of oil and gas for over a decade, domestic gas production still meets around half the UK’s needs. However, OEUK has warned that uncertainty over the future of the North Sea, especially regarding new taxes and regulations, means production is falling and could fall faster.

This would result in the UK increasing its reliance on imported gas even further at a time of competitive global demand and shortages. The shortages are linked to global long-term under-investment, exacerbated by Putin’s invasion of Ukraine.

While there will always be imports and exports of energy to support the dynamic daily operations of meeting customer demand, the energy price crisis has underlined why the UK should make the most of its domestic resources. This produces direct benefits through taxes paid, jobs supported, direct influence over any emissions associated with their production, while also retaining the companies needed to invest in and drive the transition to cleaner UK energies.

Without such investment, OEUK warned, imports would surge so fast that, by 2030, the UK would have to import 80% of its gas and 70% of its oil – and risk the loss of tens of thousands of industry jobs. Tax revenues would plummet too because, as with all imported goods and services, oil and gas from outside of the UK is not subject to UK production taxes.

Energy security is another key reason for maintaining UK production. About 24 million UK homes rely on gas for heating, while 32 million drivers have vehicles powered by petrol or diesel. Around 42% of the nation’s electricity is generated by gas-fired power stations.

Replacing all this infrastructure with low-carbon alternatives is predicted to take at least three decades – during which secure supplies of oil and gas will be essential, albeit in diminishing amounts.

Deirdre Michie, chief executive of OEUK, said: “While the UK will always import and export energy it makes sense that we make the most of the resources in our own back yard, meaning the North Sea, with all the benefits that brings such as generating UK taxes, jobs and energy security.

“We know that today, shortfalls in domestic gas production must be met by imports to help heat homes, power businesses and supporting UK manufacturing. With the UK paying a net £39bn for imports, people will wonder why we are not prioritising gas produced here and encouraging companies to invest in the North Sea.

“Gas which is shipped to the UK from across the world will also always have greater emissions than gas which is piped to our shores from the North Sea because of the extra energy needed to compress it, transport it and then turn it back into gas.

“We are proud to pay our taxes but the fresh uncertainty of further change risks the UK relying even more on other countries as companies struggle to attract investment.

“The UK and our industry are already in action, progressing a rapid transition to green energy – with UK companies set to invest up to £200 billion in offshore energies in this decade alone. The transition to low-carbon energies will only happen if we have the companies, jobs and innovation we need, based here in the UK.”