The UK Government could fuel more than one million holiday flights by unlocking fresh investment in the North Sea, according to new analysis.
Ministers have faced an international backlash after introducing a waiver for Russian-linked diesel and jet fuel imports to ease supply concerns triggered by conflict in the Middle East.
The decision has also been met with widespread disbelief by Britain’s domestic oil and gas sector, which could fill the gap but is being held back by punitive taxation and consenting delays.
Aberdeen & Grampian Chamber of Commerce is urging the Labour Government to prioritise domestic production over further imports, a move which could pump billions of pounds into the UK economy.
North Sea operators have told the UK Government they are prepared to invest £17.5billion into new domestic oil and gas projects if ministers replace the current Energy Profits Levy (EPL) with a permanent Oil and Gas Price Mechanism (OGPM).
Industry body Offshore Energies UK says the package could unlock the equivalent of 1.1billion barrels of oil and gas by 2030, which would help generate an extra 8.2 billion litres of jet fuel supply.
That would be enough to fuel roughly one million flights between London and popular Spanish holiday destinations such as Malaga, Alicante and Palma.
The extra production could also provide enough petrol and diesel to fuel 20million British cars from now until the end of the decade.
Russell Borthwick, Chief Executive at Aberdeen & Grampian Chamber of Commerce, said: “The North Sea still has the ability to support jobs, strengthen energy security and supply the fuels modern life depends on, from petrol and diesel to jet fuel for international travel. Yet billions of pounds of investment remain stuck on the sidelines at the very moment the world is being reminded how fragile global energy markets really are.
“The answer is not to punish domestic producers with a tax regime that deters investment. The UK Government should work with industry, not against it, by moving from the current Energy Profits Levy to a permanent Oil and Gas Price Mechanism which gives companies the confidence to invest while still protecting taxpayers when prices spike.
“It must also take the Energy Independence Bill back to the drawing board – no economy should willingly make itself more dependent on imported energy when it has the skills, infrastructure and natural resources to produce more at home.”
Professor John Underhill, Director for Energy Transition at University of Aberdeen, said the Brent crude oil that is produced in the North Sea is particularly well suited to producing transport fuels including petrol, diesel and jet fuel.
Applying indicative Brent crude refinery yields to the projected production suggests around 4.7% could become jet fuel – equivalent to approximately 8.2billion litres. Around 36% of the projected 1.1billion barrels could be converted into petrol and 26% into diesel, equivalent to approximately 62.6billion litres of petrol and 45.3billion litres of diesel.
Due to the UK’s shrinking refining capacity, significant volumes of any additional North Sea oil production would likely need to be exported for refining in overseas hubs such as the Netherlands before returning to the UK market as finished fuels.
However, ministers are free to negotiate long-term fixed-price supply agreements with domestic producers as part of future North Sea licences – a model used during the basin’s early decades that may once again make strategic sense in its final ones.
Professor Underhill added: “Domestic production and refining once met our needs, but with an aging stock, high operating costs and a decline in demand, investment in refineries has declined. Because of these factors, we have not produced enough jet fuel since the turn of the century and enough diesel since 2010.
“The closure of Grangemouth has brought into sharp focus the growing gap between the energy resources the UK still possesses and our declining ability to refine and process them domestically.
"Furthermore, because Scotland is not plugged in to the Exolum Pipeline System (EPS), formerly the CLH Pipeline System and the Government Pipelines and Storage System (GPSS), which serves Heathrow and Gatwick, regional airports like Newcastle, Edinburgh, Glasgow and Aberdeen are totally dependent on road haulage deliveries from England.
“At a time when geopolitical instability is once again raising concerns about fuel availability and prices, this should act as a reminder that energy security is not simply about producing oil and gas - it is also about maintaining the industrial capability and infrastructure needed to turn those resources into the fuels society depends upon every day, the jobs it secures, the tax revenue it generates and energy security it provides.”