Written evidence submitted by Valero Energy Ltd (MAN0014)

 

Introduction

 

Valero Energy Ltd welcomes the opportunity to respond to the Energy Security and Net Zero Committee’s inquiry into managing the future of oil and gas. Valero[1] owns and operates Pembroke Refinery in West Wales, one of Europe’s largest and most complex refining operations. Pembroke has a throughput capacity of 270,000 barrels of crude oil per day (bpd), supplying around 14% of UK transport fuels. 

 

Valero accounts for 15% of Welsh export GDP, making a significant contribution to the balance of payments. The company supports the employment of over 1,000 people across the UK, with the majority based in Pembrokeshire, and operate a well-established apprenticeship and graduate engineering programme supporting local school-leavers and university students.

 

  1. What should be the underlying principles of the UK’s strategic policy for keeping the oil and gas sector competitive during the energy transition?

 

1.1.  Oil refining is foundational to the national economy and critical for UK energy security. Oil products supply 47% of the UK’s final energy demand, with refineries directly and indirectly supporting thousands of high-skilled jobs in industrial communities like Pembroke. These assets enable vital transport, military, aviation and industrial sectors to function efficiently across a mature supply chain.

 

1.2.  In spite of this, the UK Government’s Modern Industrial Strategy failed to recognise refining as a foundational sector even though it underpins activity across virtually every sector of the UK economy, from transport and manufacturing to agriculture, defence and construction. As seen across the last twelve months, it is only when domestic refining capacity is lost, however, that its value is considered by policymakers. Indeed, following these most recent closures, the UK is now expected to become a net importer of all three primary petroleum products – gasoline, diesel and jet fuel – with the former going into deficit for the first time since 2000. Meanwhile, the UK’s domestic refiners remain at significant risk of carbon leakage and, without significant policy support, will continue to be undermined by international competitors who face little to no comparative policy cost burden.

 

1.3.  In order to retain a competitive refining sector that continues to add value to the UK, therefore, the Government must implement a supportive policy environment which reflects a number of core principles. These should include recognition of the sector’s role in supporting:

 

 

The UK must adopt a strategy of fuel supply resilience that retains and, if possible, grows the remaining UK refining base, in order to provide sovereign capabilities that ensures domestic fuel supply. Previous government strategies on energy security neglected to reference oil refineries whatsoever;[3] instead, the current Government must ensure refineries are incorporated into a national energy strategy, positioning refineries within the broader energy system to reflect their role in security, resilience and in providing systemic flexibility.

 

Any forthcoming downstream oil policy should acknowledge that refineries are strategic assets of national importance, as well as the vital role that refining, as a co-production process, plays in the economy and in the security of domestic fuel supply. This directly builds on the Government’s own recognition that oil and gas production will continue to contribute to the future of the UK’s energy system for decades to come.[4]

 

 

Such cost pressures do not remain confined to the energy sector; they cascade through the economy. Higher fuel prices raise operating costs for businesses, particularly in manufacturing, agriculture and freight, which ultimately pass these costs onto consumers through higher prices for goods and services. For households, increased fuel costs directly impact mobility and heating expenses, disproportionately affecting lower-income families and rural communities that rely heavily on road transport.

 

Therefore, affordability must be treated as a guiding principle alongside energy security and competitiveness. A policy framework that neglects this dimension risks undermining economic resilience and social equity during the energy transition. Supporting domestic refining capacity is not only a matter of strategic sovereignty—it is a critical measure to shield UK consumers and businesses from unnecessary cost burdens in an increasingly uncertain global energy landscape.

 

 

To meet this global demand, high levels of new resource development will be necessary together with new fossil fuel infrastructure. Closure of UK refining assets, therefore only necessitates the construction of new global refining capacity elsewhere. Not only will this generate embedded carbon during the construction phase, it ignores that UK refining operations are more efficient and offer greater emissions savings than non-European competitors. Furthermore, the loss of domestic refining would force imports of higher volumes from further distances, driving up costs and emissions.

 

2023 data shows that the Reliance Industries Refinery in Jamnagar, India, emitted 19.76 million tonnes of CO2e for 1.4 million bpd of throughput.[6] Based on a typical 0.87tes/m3 crude density, that is 0.30 tonnes of CO2 per tonne of throughput. Looking at UK Government data (such as UK DUKES table 3.1 and UK ETS Surrenders), these show that for 2022 and 2021, the UK refining sector averaged 0.219 tonnes of CO2 per tonne of throughput; this shows UK production emits 35% lower carbon emissions than this counterfactual.

 

Even domestically, whilst electrification remains the primary policy choice to achieve emissions reductions in the UK’s transport sector – underpinned by the 2030 ban on the sale of new petrol and diesel cars – the Government’s strategy faces significant challenges that means demand for – and access to – petroleum products will be critical for UK energy security and economic growth for a considerable time to come.

 

The Zero Emission Vehicle (ZEV) mandate, for example, has suffered from ongoing consumer hesitancy, rising EV costs and the need to offer substantial flexibilities (like credit transfers and borrowing) to automakers, all of which have slowed EV uptake and risk a “cliff-edge” compliance failure by 2030. Projections by independent analysts predict a cumulative shortfall of over 345,000 ZEVs in 2028 (with only around a 36% EV share of the market against the 52% ZEV mandate target), and with adoption lagging further, similar or larger deficits are likely in 2029–30 unless tighter measures are enforced.[7]

 

Indeed, those estimates preceded the announcement in the 2025 Autumn Budget that from 2028 the Government will introduce an Electric Vehicle Excise Duty (eVED) has already undermined previous government forecasts for the transition away from petrol and diesel consumption. The Office for Budget Responsibility (OBR) estimates that the eVED policy is projected to slow EV uptake by approximately 440,000 fewer EVs.[8] In addition to cost implications and slower-than-expected adoption, grid instability,[9] infrastructure limitations[10] and critical minerals supply[11] have also increasingly emerged as barriers to electrification.

 

The apparent failures of the ZEV mandate and the demand depression the eVED will create on the adoption of EVs will both in turn raise projected liquid fuel demand above levels in any pre-2025 forecast scenarios. Updated DESNZ or OBR projections that fully incorporate eVED are still awaited, but when released, they’re likely to show a meaningful increase in petrol and diesel consumption through the late 2020s and early 2030s.

 

Using the previous and non-updated demand projections, however, the UK’s fuel security is already facing considerable headwinds from an increasing reliance on imported petroleum products. Figure 1 below shows how the remaining UK refining fleet is broadly able to produce 700 thousand barrels per day (bpd) of key products against a product demand of 1,100 thousand bpd.

 

Net import demand has increased, however, from 200 thousand bpd to 400 thousand bpd, with 2026 UK balances shifting markedly following the closures of Prax Lindsey and Petroineos Grangemouth refineries. Indeed, projections for 2026 see the UK move from being ‘long’ gasoline supply to being ‘balanced’ to ‘short’ for the first time since 2000 (i.e. before the introduction of diesel car tax incentives), jet fuel imports increasing from 60% to 70% from 2024 to 2026, and Ultra Low Sulphur Diesel (ULSD) imports increasing from 30% to 43% in the same timeframe.

 

Figure 1: UK Fuel Balances 2015-2026

With increasing global demand for oil products up to 2050 and beyond, and the likely increased need for liquid fuel domestically with the challenges facing the transition to EVs, the strategic importance of the remaining UK refineries will be critical for energy security and national resilience, including as a contributor to economic growth, jobs and skills.

 

 

For example, productivity in the sector is 29% above the national average, and average pay in refining exceeds almost 90% above the UK average. Furthermore, the sector is an important contributor to government revenues, in the form of fuel duty and VAT from road fuels, accounting for approximately 3% of total tax receipts in 2023-24.

 

At a local level, Valero’s own operations offer an illustrative case study for our own region in West Wales. Valero supports the employment of over 1,000 people in the UK, both directly as employees and indirectly in the contractor supply chain, with the majority of these based at Pembroke. Every year, Pembroke Refinery contributes approximately £75 million to the Pembrokeshire economy in terms of salaries and business rates. Furthermore, every 4-6 years, major planned maintenance events – known as ‘turnarounds’ – will see the workforce expand for 2-3 months by typically 1,000-2,000 additional personnel.

 

Enabling UK refineries to continue to play a key role in supporting both national and regional economies should be a core principle of the government’s approach, and a focus of policymakers in developing a strategy for the future of the fuel sector in the UK.

 

 

In the UK context, co-production is particularly vital because of our structural product imbalance: we are short on middle distillates such as diesel and jet fuel, yet balanced on gasoline. While the UK already imports significant volumes of middle distillates, domestic refining capacity allows us to meet a portion of our own needs and avoid complete dependence on imports.

 

At the same time, the UK’s long-term history of gasoline exporting has demonstrated a capability to supply the world, enabling us to lean into an export strategy that capitalizes on growing global gasoline demand, turning what could be a vulnerability into a competitive advantage.

 

The UK is naturally advantaged by its coastal refineries that can deliver products to any international market; that means that with global demand for petroleum projected to grow globally - particularly for aviation, marine and petrochemical markets – rather than shrink, the UK has an opportunity to continue to develop its plants, diversify outputs, and secure a competitive export position of our lower emission sites.

 

Equally, the co-production nature of the refining sector explains why suggestions that the UK refining fleet convert solely to low-carbon production – either as bio-refineries or SAF plants – would be a thoroughly misguided endeavour.

 

While such conversions are often presented as a model for a “just transition,” the practical consequences are severe. Converting a crude refinery with a typical throughput of 80–160 thousand bpd into a biodiesel or SAF plant typically reduces capacity by around 90 percent, as seen in the case of Total La Mède, which fell from 157 thousand bpd to just 11 thousand bpd after conversion.

 

Employment also collapses by 60 to 80 percent, devastating local economies, as illustrated by ENI Venice, where jobs fell from 1,000 to 200. Furthermore, the capital costs associated with are enormous – typically between $500 million and $1 billion – and require two to three years to implement, often with heavy state support.

 

Even then, the economics are fragile: biorefineries need margins of around $30 per barrel to service debt alone before any other costs, compared to historical fossil margins of just $2 per barrel. Energy security suffers because these conversions shrink domestic supply and force higher imports, while only addressing a niche segment of demand.

 

The common conversion pathway involves closing most refinery units and converting diesel or heavy fraction hydro-treatment units to Eco-Finer technology for HVO production, leaving extensive redundant equipment and oil tanks that require costly decommissioning. For example, Project Willow estimated £740–900 million in decommissioning costs to replace the 150 thousand bpd Grangemouth refinery with a 14 thousand bpd HVO plant.

 

In short, wholesale conversion sacrifices scale, jobs, and security for a model that is financially fragile and strategically narrow. The UK cannot afford to dismantle its refining backbone under the illusion of sustainability. Instead, policy should embrace the co-production nature of refining as a strategic asset, supporting incremental decarbonization within existing frameworks while recognizing that refineries are critical to energy security, industrial employment, and export competitiveness. A strong, adaptive refining sector rooted in co-production is essential for the UK’s resilience and its ability to compete globally.

 

1.4.  Without embedding these principles at the heart of government thinking – the importance of refineries to energy security, the importance of refineries to meeting global and domestic fuel demand, recognition of the importance of co-production as they key element of refining’s contribution to industrial resilience and export strength, and the importance of refineries to supporting national and regional economies – the UK risks even further undermining the viability and strategically integral nature of its refining capacity.

 

  1. How can the UK continue to make best use of its oil and gas infrastructure as an asset while delivering the transition?

 

2.1.  The UK’s refining sector is a critical pillar of the oil and gas sector, the national economy, energy system and industrial communities across the UK. Refineries like Pembroke are strategic assets that support high-value employment, anchor complex global supply chains, generate significant export revenue and deliver fuels that power nearly every sector of the UK economy, including transport, agriculture, manufacturing, construction and defence.

 

2.2.  Events in recent years, such as the war in Ukraine and resulting global supply chain disruptions, have demonstrated the importance of indigenous energy infrastructure and manufacturing. Domestic refining capacity serves as a buffer against external shocks, offering supply flexibility and strategic redundancy at moments of crisis.

 

2.3.  Critically, refining is also a platform for future low-carbon energy investment. UK refineries are well positioned to scale the production of low-carbon liquid fuels (such as HVO and SAF), integrate hydrogen technologies, and adopt carbon capture solutions. With the right policy support, the sector can become a central actor in delivering the UK’s emissions reduction ambitions, creating new jobs, boosting regional growth, and enhancing supply chain resilience.

 

2.4.  Without targeted policy reforms, however – particularly to the UK Emissions Trading Scheme, the sectoral scope of the UK Carbon Border Adjustment Mechanism (UK CBAM) and transport emissions reduction policy -  the UK risks losing this essential capability, which once lost cannot be re-established. The closure of two refineries within a year with only four now remaining is not an aberration, representing a significant destruction of our industry. Refining is capital-intensive with globally mobile products. When policy frameworks make investment unviable, capacity will move offshore.

 

2.5.  Our policy solutions are outlined in answer to question 4, but Valero is clear that the UK Government has a choice, but with only a short window remaining within which to act. With pragmatic, proportionate and internationally competitive policy design, it can ensure that UK refining evolves, not vanishes, through the energy transition. In doing so, it will strengthen the country’s economic sovereignty, reduce emissions in a globally coherent way and ensure our industrial regions and communities can benefit from long-term prosperity.

 

  1. How can the UK ensure that critical services that currently rely on a reliable fuel supply chain (from hospitals generators, to freight logistics, to food supply) can transition to low carbon alternatives without any disruption.

 

3.1.  By failing to consider the lifecycle emissions, from cradle-to-grave, of Battery Electric Vehicles (BEVs), internal combustion engine vehicles (ICEVs) powered by low-carbon liquid fuels have been unfairly disadvantaged, which in turn has a drastic impact on the future longevity of the UK refining system, which is built to meet transport fuel demand. The current approach of relying predominantly on BEVs has required a high-degree of government compulsion and market intervention, including in the recent Budget, with a further £1.3 billion allocated for the EV grant scheme. Despite this, EVs are still too expensive for many consumers and China’s overwhelming dominance over the critical minerals market, and increasingly that final BEV product, poses significant challenges to the UK’s supply chain resilience.

 

3.2.  Nevertheless, readily available drop in alternatives exist today for fossil fuels, such as Hydrotreated Vegetable Oil (HVO), which can lower lifecycle GHG emissions up to 80% compared with traditional diesel,[13] and offers a more practical solution for ensuring a reliable supply chain for critical services – particularly where EV charging infrastructure is lacking and range anxiety is a significant concern for motorists. 

 

3.3.  HVO is also compatible with much of the equipment used in hard-to-abate sectors such as farming, logistics and construction where heavy vehicles and machinery cannot be readily electrified, unlocking further decarbonisation opportunities. The long term storage properties of HVO are excellent making it the right choice for backup generator systems that aid resilience of critical UK services.

 

3.4.  Picking technology ‘winners’ such as electrification discourages innovation, undermines supply chain resilience, and increases dependence on imported critical minerals for batteries, whilst alternatives such as low-carbon hydrogen for use in transport appears to have fallen away as an alternative option. It will also undermine tax receipts, as government policy shifts vehicle ownership away from consistently reliable revenue raising mechanisms like fuel duty, towards heavily subsidised BEVs – even with the proposed introduction of the eVED from 2028.  The proposed mileage levy is less than half the typical fuel excise duty cost per litre and does not appear to be subject to VAT in the same way as the fuel excise duty.

 

3.5.  To ensure the UK is still able to rely on a reliable fuel supply chain, it must immediately re-focus road transport emissions reduction policy on the lifecycle emissions of all technologies, rather than focus solely on tailpipe emissions. This will require Government to remove the ZEV mandate and allow low-carbon liquid fuels to contribute to road transport decarbonisation, abolishing rigid phase-out dates like the 2030 ban that pre-empt technology developments and penalise other viable low-carbon solutions.

 

3.6.  The UK should also look to create an investment framework for low-carbon fuel adoption akin to that in the United States, including for SAF and HVO, incentivising companies to pursue margin rewards for domestic production, rather than revenue capture through state subsidy. Where industry leads the development of projects without a government ‘competition’ or ‘allocation round’, project delivery has a history of being faster and more economic. The fuel industry did not need any subsidy or revenue certainty mechanism to manufacture FAME, HVO or SAF. And yet other industries have needed these expensive support mechanisms for renewable electricity, BEVs and unproven novel SAF technologies.

 

  1. What does the Government need to do to ensure that the transition from oil and gas does not simply deindustrialize areas and damage the communities that currently benefit from the fossil fuel industry?

 

4.1.  Current Government policy is directly impacting UK refineries and industrial communities reliant on them, causing deindustrialization. The UK has lost a third of its refining capacity – representing over 260,000 barrels per day or approximately 26% of refining capacity – in the past 12 months with the closures of Grangemouth and Lindsey refineries, resulting in the loss of hundreds of jobs directly and thousands more in the wider supply chain.

 

4.2.  The decline in UK refining capacity is a result of the UK being at a comparative disadvantage in global markets where our main competitors are located, notably North America, Africa, the Middle East and Asia, regions which do not face the same policy burdens and associated cost. (Europe, by contrast, is not a direct competitor to UK refiners, largely owing to both markets being short of middle distillates, such as diesel and jet fuel, and the fact they are deindustrializing at a similar rate of decline to the UK.)

 

4.3.  The policy costs being absorbed by UK refineries undermines their competitiveness versus global competitors, contributing to carbon leakage. Most significant of all is the impact of the UK Emissions Trading Scheme (UK ETS). Indeed, carbon pricing under the UK ETS is one of the highest costs faced by UK refiners. In 2023, UK refineries paid £217 million in ETS compliance costs, representing one of the largest components of operating expenditure. This cost is non-existent in key competitor regions such as the U.S. Gulf Coast, Asia or the Middle East.

 

4.4.  Furthermore, the commitment by the UK Government to link UK ETS with the EU ETS has driven prices up further. Between January and May 2025, the UK ETS price increased from £36 to £54 per tonne, a 50% rise, adding £100 million per year in cost burden to UK refining. Since then, prices have continued to rise and following the 19 December announcement that linkage is aimed to be concluded by the time of the upcoming UK-EU Summit,[14] prices are now at £69 per tonne, adding a further £80 million per year in cost burden to the UK refining industry. Once this is aligned with the EU’s higher carbon price and lower free allowance rate of the EU as has been announced, the situation will only worsen for UK refineries (with the gap having now narrowed to only £8/tes).

 

4.5.  The UK’s punitive ETS policy will make continued operation unsustainable – as it has already for Grangemouth and Lindsey refineries. A recent report by the Prosperity Institute shows that estimated ETS costs as a proportion of operating profits for the refining sector make up an increasingly unsustainable burden on asset profitability.[15] Indeed, this analysis (see Figure 2 below) shows that, prior to its insolvency, Prax Lindsey Oil Refinery’s ETS costs accounted for 120% of the refinery’s operating profit.

 

Figure 2: Taken from the ETS impact on UK refining case study from the Prosperity Institute

4.6.  Industrial emissions targets should not come at the cost of the UK’s vital foundational industries, including refining. If UK manufacturers continue to bear unsustainable carbon costs that international competitors do not, then we are not competing on a level playing field and risk economic activity moving overseas meaning the UK will achieve decarbonization through the wholesale deindustrialization of its vital industry The Government’s current stance will only incur further job losses and industrial decline here, as investments and profits move offshore, leading to an overall increase in global emissions.

 

4.7.  Furthermore, despite refined petroleum products being highly exposed to carbon leakage, it is currently excluded from scope of the UK Carbon Border Adjustment Mechanism (UK CBAM). Meanwhile, the cap on ETS allowances is tightening, only compounding this issue. Without CBAM protection for both imports and a similar carbon leakage mitigation put in place for exports, or a pivot to full free allowance coverage entirely, UK refiners will inevitably face continued contraction to the point of extinction as a viable sector. This will continue the cycle of decarbonization via deindustrialization, further undermining the UK’s energy security.  It is not logically consistent to place an ETS cost on territorial production emissions whilst maintaining open trade borders with countries that do not place the same cost on their production emissions.

 

4.8.  Finally, UK refiners face electricity and gas prices significantly higher than those in major global exporting countries they compete with, yet they are excluded from the scope of support schemes such as the British Industry Supercharger and Energy Intensive Industries Compensation Scheme.

 

4.9.  To maintain the UK’s refining capacity and enable its continued, long-term contribution to wider economic growth and energy security, therefore the following reforms are recommended:

 

a) ETS Reform and Carbon Leakage Protection

 

 

b) Include Refining in the UK CBAM

 

 

c) Avoid Negative EU ETS Linkage Impacts

 

 

d) Address Energy Price Impacts

 

 

  1. How should the UK manage a declining domestic market in gas, including how the gas infrastructure can be partially, or completely, decommissioned without putting the burden on a shrinking number of consumers? What should the Government be doing to ensure the supply chains for the oil and gas sector are sustained as North Sea outputs decline and they transition to supporting the renewables sector?

 

5.1.  Answering questions 5 and 6 together, Valero believes that the UK should not acquiesce to declining output of oil and gas from the UK Continental Shelf (UKCS).

 

5.2.  A maximum extraction policy for North Sea oil is not simply an economic choice; it is a strategic imperative for national resilience, economic development and fiscal strength. The UK’s offshore oil sector is more than a source of hydrocarbons – it is a repository of critical skills, infrastructure and industrial capability that underpin UK energy security. Even if UK refineries are not running this oil under normal market conditions, their ability to do so remains a cornerstone of resilience.

 

5.3.  In times of geopolitical strife or supply disruption, government can override commercial decisions and direct domestic crude into UK refineries, ensuring continuity of essential fuels. This option only exists if we maintain a robust upstream sector capable of delivering barrels when needed.

 

5.4.  Analysis from the North Sea Transition Authority underscores that the UKCS still holds billions of barrels of recoverable reserves.[16] Premature decline would strand infrastructure and erode the skills base required for both hydrocarbons and future low-carbon projects such as CCS and hydrogen. Norway’s experience proves the point: operating in the same geological basin, it has pursued aggressive extraction and achieved record output in recent years, reinforcing its energy sovereignty and fiscal strength.

 

5.5.  By contrast, UK production has fallen sharply, driven not by geology but by policy uncertainty and punitive taxation, which has already chilled investment, accelerated decline and jeopardized thousands of jobs. A maximum extraction policy would reverse this trajectory, stabilizing employment and sustaining the industrial ecosystem that future energy transition depends upon.

 

5.6.  Critically, resilience is not just about barrels – it is about optionality. If the UK allows its upstream sector to wither, it forfeits the ability to redirect crude to domestic refineries in an emergency, leaving the country wholly exposed to volatile global markets and LNG-driven supply shocks. Maintaining extraction capacity ensures that, even if commercial flows favour export or foreign refining in normal times, the UK retains sovereign control over its energy destiny. In short, maximum extraction is not a relic of the past; it is a forward-looking strategy to safeguard national security, protect jobs, and preserve the industrial capabilities that will anchor Britain’s net-zero future.

 

5.7.  Similarly for gas, the UK should adopt a maximum extraction policy that sustains domestic supply for as long as demand exists, whilst limiting the UK’s exposure to LNG‑set global gas prices. This approach is consistent with the UK’s previous statutory MER (Maximizing Economic Recovery) regime, but which was updated in 2021 to integrate net zero, obliging industry and the regulator to maximize the net value of economically recoverable petroleum while supporting decarbonization.[17]

 

5.8.  Such net zero measures add additional costs on UK upstream operations, making them uncompetitive to operate. This is in addition to the Energy Profits Levy (EPL), which continues to inflict a debilitating tax burden on North Sea oil and gas production. Offshore Energies UK emphasizes that the current 78% headline tax rate stifles investment, accelerates basin-wide decline and puts thousands of skilled jobs at risk – arguing its continued application “holds back investment and accelerates the decline of the North Sea” and threatens the integrity of critical infrastructure.[18]

 

5.9.  The Chancellor’s latest Budget was deeply disappointing in this regard, with the EPL staying in place until 2030 unless the Energy Security Investment Mechanism (ESIM) price triggers are met, and will be replaced with a permanent Oil and Gas Price Mechanism (OGPM), which will impose a 35% “windfall-style” charge, levied only when realized prices exceed thresholds of $90 per barrel for oil and £0.90 per therm for gas (CPI-indexed).

 

5.10.           These costs are unsustainable and simply makes the UK increasingly dependent on imported gas, set by global LNG market pricing. If the UK is ever to achieve energy independence and reduce the cost of domestic and industrial energy costs, it needs to redevelop a net long gas supply position it previously enjoyed before 2004.

 

5.11.           After Russia’s invasion and the re‑routing of global flows, LNG became Europe’s baseload natural gas supply. Market analysis shows Netherlands-based Title Transfer Facility (TTF) prices and volatility are now driven by global LNG availability; U.S. export growth narrows the transatlantic spread, but European prices still track LNG dynamics, not UKCS costs. The only way to structurally reduce UK exposure is to be long domestic gas – maximizing UKCS supply to displace LNG‑linked import volumes and hedge price spikes.

 

5.12.           Norway shows what is possible. The UKCS and Norwegian shelf sit in the same rifted North Sea system (Viking, Central, Moray, Southern basins), with common geology. Crucially, however, Norway has increased output in the last decade and achieved record gas production in 2024, becoming Europe’s largest supplier – demonstrating that mature basins, with the right licensing and investment signals, can expand.

 

January 2026

 

[1] “Valero” refers to Valero Energy Corporation and all of its direct and indirect subsidiaries, including Valero Energy Ltd.

[2] Energy and Climate Change Committee, ‘UK Oil Refining’, https://publications.parliament.uk/pa/cm201314/cmselect/cmenergy/340/34004.htm, 16 July 2013

[3] For example, see the 2023 ‘Powering Up Britain’ strategy: https://www.gov.uk/government/publications/powering-up-britain

[4] UK Parliament Hansard, Secretary of State for Energy Security and Net Zero Statement, ‘The UK's clean energy future’, https://questions-statements.parliament.uk/written-statements/detail/2025-03-05/hcws502, 5 May 2025

[5] International Energy Association (IEA), ‘World Energy Outlook 2025’, https://iea.blob.core.windows.net/assets/1438d3a5-65ca-4a8a-9a41-48b14f2ca7ea/WorldEnergyOutlook2025.pdf, November 2025

[6] Climate Trace, ‘RPL Jamnagar: the world’s largest oil refinery’, https://climatetrace.org/news/rpl-jamnagar-the-worlds-largest-oil-refinery, 9 October 2025

[7] Car Dealer Magazine, ‘Carmakers on course to miss ZEV mandate targets by 346,000 units by 2028’, https://cardealermagazine.co.uk/carmakers-on-course-to-miss-zev-mandate-targets-by-346000-units-by-2028-cox-automotive/312406, 11 February 2025

[8] OBR, ‘Economic and Fiscal Outlook’, https://obr.uk/docs/dlm_uploads/OBR_Economic_and_fiscal_outlook_November_2025.pdf, November 2025, p.75 

[9] Engineer Live, ‘Is the UK’s electricity grid ready for the rise of electric vehicles?’, https://www.engineerlive.com/content/uks-electricity-grid-ready-rise-electric-vehicles, 18 August 2025

[10] The Guardian, ‘UK electric car charger rollout slows amid worries over EV switch’, https://www.theguardian.com/environment/2025/dec/25/uk-electric-car-charger-ev-switch-sales, 25 December 2025

[11] UK Government, Department for Business and Trade (DBT), ‘Vision 2035: Critical Minerals Strategy’, https://assets.publishing.service.gov.uk/media/6937fa7833c7ace9c4a41e25/uk-critical-minerals-strategy-vision-2035.pdf, 22 November 2025

[12] UK Petroleum Industry Association, ‘The Economic Contribution of the UK Downstream Oil Sector’, https://www.fuelsindustryuk.org/media/jgfnppj5/the-economic-contribution-of-the-downstream-oil-sector-evidence-paper-1.pdf, 2019

[13] Life cycle GHG emissions reductions depend on the life cycle analysis methodology or pathway used, carbon intensity of the feedstocks, and energy intensity in the supply chain, such as feedstock gathering mileage or distribution mileage of finished product. HVO’s life cycle analysis carbon intensity is calculated using methodologies approved by the jurisdictions where these fuels are sold and verified by third parties. See Valero Report on Guiding Principles at 72 n. 2.

[14] “The UK and EU have also agreed to complete talks on the new food and drink (SPS) deal and carbon linking (ETS) agreement before the next UK-EU Summit in 2026.”, Cabinet Office, UK Government, ‘Young people from all backgrounds to get opportunity to study abroad as UK-EU deal unlocks Erasmus+’, https://www.gov.uk/government/news/young-people-from-all-backgrounds-to-get-opportunity-to-study-abroad-as-uk-eu-deal-unlocks-erasmus, 17 December 2025

[15] Rian Chad Whitton, ‘Destroying the Foundations: How Net Zero Could Wreck British Industry for Good’, The Prosperity Institute, https://www.prosperity.com/media-publications/destroying-the-foundations/, 9 December 2025, pp.31-33

[16] North Sea Transition Authority (NSTA), ‘UK Oil and Gas Reserves and Resources’, https://www.nstauthority.co.uk/media/vtjkyqnf/uk-reserves-and-resources-report-as-at-end-2023.pdf, 2023

[17] North Sea Transition Authority (NSTA), ‘The OGA Strategy’, https://www.nstauthority.co.uk/regulatory-information/regulatory-framework/the-oga-strategy/, 2021

[18] Offshore Energies UK (OEUK), ‘Secure the UK’s Energy Future’, https://oeuk.org.uk/who-we-are/industry-campaigns/future-of-the-north-sea/