WoodMac Says Iran Conflict Should Prompt North Sea Rethink

Why It Matters

Reversing the exploration ban could reduce the UK's reliance on volatile LNG imports, lower emissions and protect consumers from price spikes, while supporting domestic jobs and investment.

Key Takeaways

• UK may rely on US LNG >60% by 2035.
• Each Tcf North Sea gas cuts 15 MtCO2e emissions.
• UKCS gas cost half US LNG short‑run price.
• New exploration ban limits domestic energy security.
• Oil & Gas Price Mechanism aims at investor certainty.

Pulse Analysis

The recent flare‑up in the Middle East, highlighted by the Iran conflict, has sharpened concerns about the United Kingdom’s exposure to global energy shocks. With more than 60 % of projected gas demand slated to be met by U.S. liquefied natural gas by 2035, policymakers face a stark choice: continue to rely on a volatile import pipeline or tap the mature yet under‑exploited North Sea reservoirs. Domestic production offers a strategic hedge against geopolitical disruptions, ensuring a steadier supply chain for households and industry alike.

Economically, Wood Mackenzie points out that short‑run North Sea gas prices are roughly half those of U.S. LNG, delivering immediate cost savings for the British market. Moreover, every additional trillion cubic feet of gas would displace carbon‑intensive LNG, cutting about 15 MtCO₂e of scope‑1 and‑2 emissions. To unlock this potential, the government’s proposed Oil and Gas Price Mechanism—featuring a 35 % revenue share and price thresholds of $90 per barrel for oil and 90 p per therm for gas—aims to provide investors with certainty while safeguarding public revenue during price spikes.

Balancing energy security with decarbonisation remains the central policy dilemma. Industry leaders, from Wood Mackenzie to Offshore Energies UK, advocate a “both‑and” strategy that couples aggressive renewable rollout with renewed hydrocarbon development, carbon capture, utilisation and storage (CCUS), and emerging hydrogen projects. A stable tax framework, coupled with clear licensing pathways, could revitalize North Sea investment, preserve skilled jobs, and reduce the UK’s dependence on imported LNG—ultimately delivering a more resilient, affordable, and lower‑carbon energy system for the decade ahead.