• The United Kingdom is the largest producer of oil and the second-largest producer of natural gas in the European Union. Following years of exports of both fuels, the UK became a net importer of natural gas and crude oil in 2004 and 2005, respectively.
• Although aggressive targets for renewable energy are in place, oil remains important to the UK energy balance, with oil contributing 38 percent of total energy consumption.
• Recent increases in tax rates for the oil and gas sector, coupled with technical issues, have contributed to sharp declines in UK oil production. Higher tax rates have made the UK fields less competitive, which were already strained by high operating and decommissioning costs.
• Although a number of new fields are expected to come online in 2013, UK production will continue to decline as new production will not be sufficient to offset the declines.
• Once a major exporter of oil, the UK exports have dropped in tandem with decreasing domestic production.
• UK's natural gas production has been on a long-term declining trend, but the country continues to produce sizeable natural gas volumes. In 2011, domestic natural gas production was sufficient to satisfy more than half of domestic consumption.
• Electricity generation from fossil fuels accounts for the majority of electricity produced in the UK, with coal occupying the top spot among all sources.
• Although natural gas-fired power stations were replacing coal as the principle source of the UK power supply for a number of years, this trend seems to be reversing. Coal use for electric power generation increased in 2012, likely due to the relative cost of natural gas in the UK.
• Currently accounting for about one-fifth of total electricity generation, nuclear power plants are central to the UK government plans for future generation. Much of the additional generating capacity will be filled with new nuclear units.

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Analysis Last Updated: May 14, 2013