London (Platts)--29Nov2012/1106 am EST/1606 GMT

The UK will likely see its net oil imports rise to 43% of its oil demand by 2020, from around 30% currently, as output from the country's ageing North Sea fields continues to decline, the UK government said Thursday.

According to a new energy security report by the UK's Department of Energy and Climate Change (DECC), the country's North Sea oil production is expected to decrease at an average rate of around 5% a year, making the former oil exporter increasingly dependent on costly imports.

By 2020, the UK expects its net imports of oil and products to reach some 628,000 b/d of oil, up from about 442,000 b/d in 2011, according to government data supporting the report. Net oil imports will then continue to grow, rising to over 1 million b/d, or 67% of demand, in 2030, according to the data.

The government said it also expects the UK to be a net importer of 53% of its gas demand by 2020, a figure which will rise to 76% in 2030.

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"Declining reserves of fossil fuels in the UK Continental Shelf (UKCS) are making the UK increasingly dependent on imports at a time of rising global demand and increased resource competition," the document states.

Last year, the UK consumed 68 million mt of oil, representing around 34% of the country's total energy consumption, the DECC said.

Of the UK's current final consumption of oil products, 21 million mt is diesel, 14 million mt is gasoline, 11.5 million mt is jet fuel and 5 million mt is gasoil, with the remainder made up of other oil products.

Although oil imports are increasing the UK's exposure to international markets, the government said the country has "plentiful" import capacity to meet its future oil demand needs.

OIL OUTPUT SLIDE

It is the first time that a British government has produced an energy security strategy, which has been published to accompany its long-awaited Energy Bill to promote future low-carbon energy markets.

The strategy document concludes that a combination of energy efficiency, tax breaks on production, better energy networks and reduced import dependency are needed to secure energy supplies.

UK oil production has fallen steadily since reaching a peak of 2.8 million b/d in 1999 and the country became a net importer of oil and gas in 2006 and 2004, respectively.

Earlier Thursday, the DECC said UK oil production slumped to a new low of 617,800 b/d in September, down 51% on the same month of 2011, hit by maintenance on a large oil field and a gas plant.

Last year, the UK oil and gas production slipped by 19% to 1.8 million boe/d due to weak gas demand following a warmer-than-average winter, and a large number of unplanned stoppages.

The government has estimated, however, that some 20 billion boe of oil and gas has yet to be extracted and produced in the UK. The government has recently received praise from oil companies for a raft of tax breaks designed to promote spending on offshore developments in the North Sea.

The DECC also said it sees demand for oil remaining "relatively constant" in the short term, but estimated that at least 65% of the UK's transport fleet would need to be electrified by 2050 to meet its own low-carbon targets.

It concluded, therefore, that the UK's exact levels of oil use in 2050 will be dependent on innovations in the transport sector.

--Robert Perkins, robert_perkins@platts.com
--Edited by James Leech, james_leech@platts.com

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