RICHARD ORANGE
THE WORLD'S top energy watchdog has warned that the UK economy will become a net importer of oil this year for the first time in more than a decade - three years earlier than the government has predicted.
The International Energy Agency (IEA) has forecast that North Sea oil production will dip below 1.7m barrels per day this year, forcing the economy to rely on more imported supplies to meet demand.
The warning follows the Russian decision to shut off gas to Europe that thrust energy security into the foreground and further emphasises the extent of the British government's failure to anticipate energy threats to the economy.
It will also encourage more criticism of Chancellor Gordon Brown's raid on North Sea profits in his November pre-budget report - which has already caused Shell to cut back its UK exploration and production programme and prompted every oil company in the North Sea to review its activities.
The International Energy Agency's supply analyst David Fyfe, said: "Given expected oil production this year of below 1.7m barrels per day, the UK faces the prospect of becoming a net crude importer again this year for the first time since 1992."
The IEA sees UK oil demand for 2007 of more than 1.8m barrels per day, which it expects North Sea production will only be able to match for the first three months of the year.
Output is projected to fall to 1.65m barrels per day between March and June, and to 1.55m barrels per day between July and September, before rebounding slightly to 1.66m barrels per day in the last three months.
The government's more optimistic forecasts do not see the UK becoming a net importer until 2010.
Fyfe said: "In the last three years production has declined every year more than 200,000 barrels per day or more. We are looking at the slate of projects coming up and we are not factoring in any of the unexpected outages which have happened in the past few years."
The IEA's warnings raise the prospect that the government may turn out to be as badly wrong-footed by the decline of UK oil production as it was by the decline of UK gas - a failure which has put the UK on the edge of a gas crisis this winter.
A spokesman for the Department of Trade and Industry, which is responsible for the North Sea said: "We do on occasions become a net importer of oil for certain months, but for the year overall we are not net importers. We think that, by 2010, we will become net importers for the year as a whole."
Although the IEA has not yet completed its forecast for 2007, Fyfe said production may creep back above demand thanks to the Buzzard field coming on stream. But any recovery is not likely to be prolonged.
The news will also come as a shock to UK oil producers who share the government's optimistic forecast.
A spokeswoman for the UK Offshore Operators Association, which represents North Sea producers said: "We believe we will be self-sufficient in oil until the end of the decade, although we are in the process of updating our figures."
Peter Spencer, chief economist for UK Item Club, which uses the same economic forecasting models as the Treasury, said the shift would be mainly symbolic for the UK economy.
He said: "What really matters for the UK economy isn't how much oil production we have, or even oil prices, but interest rates."
He added: "We were in such a hurry to exploit all our oil and gas resources that we burnt it all off when prices were cheap."
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