The UK saved around £2.5bn last year by relying on its own offshore gas reserves rather than purchasing imports of liquified natural gas (LNG), according to new analysis, as calls grow for new oil and gas drilling in the North Sea.
Stifel, the investment bank, also concluded that using its own offshore gas resources to extract Liquified Natural Gas (LNG) would be significantly better than paying for imports this year, in particular due to the rising cost of LNG as a result of the Iran war.
Gas prices are up more than 50 per cent since the first strikes by the US on Iran at the end of February, and Tehran’s retaliatory strike on Qatar’s Ras Laffan plant – which produces around a fifth of the world’s LNG – has sparked major supply fears. It is expected that the plant will require several years to repair and get back to full production.
However, pressure on the government to reopen North Sea gas fields has been met with widespread opposition, with the Energy and Climate Intelligence Unit (ECIU) pointing out that up to 90 per cent of gas in the region has already been extracted and that the faster it is extinguished, the more the UK will become reliant on overseas imports unless the transition to renewables is accelerated.
The question of whether to allow more drilling for domestic oil and gas in the North Sea has piled pressure on Sir Keir Starmer in recent weeks, with members within his own cabinet appearing to be at odds over the issue.
Last week, the government denied that Ed Miliband is expected to give the green light to the first major North Sea field project in almost 10 years. However, chancellor Rachel Reeves said she would be “very happy” to support exploration at the Rosebank and Jackdaw sites.
Meanwhile, opposition leader Kemi Badenoch has urged for more drilling of domestic oil and gas in the North Sea instead, joining the likes of Donald Trump, who has long called for the UK to drill domestically.
The US president has repeatedly criticised wind power and urged the British Government to focus on drilling in the North Sea, telling Sir Keir to “drill, baby, drill”.
Stifel’s assessment of saving billions, which was released last month, is based on the context of importing the same amount of gas from overseas, rather than continuing to shift energy demands to a different source.
“Unsurprisingly – and we are frankly astonished that this has to be stated – the UK’s own North Sea gas is cheaper than imported LNG, and we estimate this saved the UK £2.5bn in 2025 alone,” said analyst Chris Wheaton. “With the increase in global LNG prices due to the Persian Gulf conflict, we expect that amount will be substantially higher in 2026.”
Stifel has previously argued this year that the windfall tax applied to energy firms is too high and that reducing North Sea extractions does not lower emissions, merely shifts them to other nations. The bank has also proposed a change to taxation for energy firms, which it says would generate £1-2bn per year extra for public finances, despite taxing those companies less, due to higher expenditure by those firms moving through the economy.
However, the ECIU has advised against additional gas extraction from the North Sea.
“The UK has already made huge strides towards renewables, but as the Energy Crisis Commission has warned, unless we continue that shift away from gas, whether it comes from the North Sea or not, the risk remains that bills will continue to spike,” said Jess Ralston, ECIU head of energy.
“This is the second gas price crisis triggered by a war in just a matter of years. The longer the UK remains dependent on gas for power, the higher the risk of being hit by another crisis. More North Sea gas won’t bring down prices, which are set by international markets, and around 90 per cent of North Sea oil and gas have already been extracted. Output will decline, so either the UK switches to renewables or becomes ever more dependent on foreign gas.”
In addition, research and campaign organisation Uplift has warned that “more domestic oil and gas production makes no difference to UK energy bills”.
A statement released in late March from the group said: “North Sea output is too small to influence global prices, and reserves are owned by oil and gas companies who sell them to the highest bidder at international market prices.
“In 2023, during the energy crisis, the then-energy secretary, Claire Coutinho, admitted that new drilling would not bring bills down.
“Official projections, based on expected development activity – even if new North Sea fields are developed – the UK’s reliance on imported gas is set to rise from 55 per cent today to more than two-thirds dependent by 2030, and over 90 per cent dependent on gas imports by 2050.
“Opening new oil and gas fields makes almost no difference to UK dependency on gas imports.”
