Economic Report 2020

UK energy consumption In 2019, the UK’s total energy consumption was around 190 million tonnes of oil equivalent (mtoe). This figure is almost 20 per cent lower than in 2000, despite the UK economy increasing by 37 per cent (in real terms) during the same period. Within this, despite a total reduction in consumption of 19 per cent, the relative importance of oil and gas in meeting the UK’s energy needs has slightly increased, from 74 per cent of consumption in 2000 (33 per cent oil and 41 per cent gas) to more than 75 per cent in 2019 (36 per cent oil and 39 per cent gas). This period has also coincided with a 39 per cent reduction in greenhouse gas emissions from the UK economy, from 707.9 million tonnes of CO 2 equivalent (mtCO 2 e) to 435.2 mtCO 2 e. Developments in electricity generation have been instrumental in supporting the reduction in emissions, with releases from power stations having fallen by almost two-thirds since 2000. Over the last two decades coal generated electricity has declined by 94 per cent, whilst the contribution from renewable sources has grown, increasing from less than 3 per cent of the electricity mix in 2000 to 36 per cent in 2019. Along with this, the contribution of gas has also remained steady, from 39 per cent in 2000 to 41 per cent last year. However, electricity power generation only accounts for 18 per cent of UK total energy consumption, as transport along with domestic and industrial heating and wider industrial use make up the majority of consumption. Transport accounts for 40 per cent of total energy consumption, with oil meeting 96 per cent of these needs. Meanwhile,domesticuse(primarilynatural gas forheating)

accounts for 29 per cent of total energy consumption. 8 The current options for replacing oil and gas from these sectors are much more limited and have widespread technical and economic challenges. Demonstrating the scale of the challenge, 85 per cent of domestic homes (23 million homes) have a gas fuelled boiler installed which will need to be replaced with alternatives. Building on the UK’s supply chain successes New technologies such as electric vehicles, hydrogen and ground source heating pumps are now emerging to displace conventional solutions, however the pace of change is constrained by their cost and technological maturity. As this report notes, the development of hydrogen and CCUS are opportunities, where the UK’s oil and gas supply chain has competitive advantage that we should make the most of as we come out of the COVID- downturn. Thousands of UK companies 9 have the technical, design and project management expertise, coupled with the infrastructure and skills to deliver these new energy opportunities at scale both to the domestic market and internationally. Although its use will continue to evolve, all projections consistent with net zero — including the Climate Change Committee and National Grid Future Energy Scenarios – expect significant quantities of oil and gas to provide secure and affordable energy throughout the shift to a lower-carbon economy. This is provided their production and use are achieved with fewer associated emissions.

8 https://www.gov.uk/government/statistics/energy-consumption-in-the-uk - ECUK: Consumption data tables. 9 https://assets.ey.com/content/dam/ey-sites/ey-com/en_uk/news/2020/02/ey-review-of-the-uk-oilfield-services-industry.pdf

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