UK Downstream Oil Sector

Michael Fallon Excerpts

Wednesday 9th April 2014 Written Statements

[The Minister of State, Department of Energy and Climate Change (Michael Fallon)]

Today, the Department of Energy and Climate Change (DECC) is publishing the conclusions of its review of the role of UK’s refining and fuel import sectors. I am grateful to all those who contributed to this review.

As we progress toward a low-carbon economy in the UK, oil products are, and will continue to be, crucial to our economy and to consumers in the UK for some years to come. The review was designed to assess the respective contributions that domestic production and imports make to resilient fuel supplies. It sought to understand better the global context and challenges facing the oil supply sector, and the impact that market distortions and the regulatory framework have on competitiveness. It also considered what role the Government should play in supporting the sector.

Given the recent closures of refineries in the UK, the review had a particular focus on the refining sector in the UK but it also considered the midstream sector more broadly, including the role of the imports sector and the benefits it brings.

The review concluded that resilience and security of supply in the UK is supported by retaining a mix of domestic refining and imported product. This is in line with the Government’s energy security of supply strategy which recognises the benefits of supply diversity. Global commercial factors will continue to affect the refining market in the UK and the EU more broadly, and further closures across the continent are likely in future. A package of actions has been developed by Government, which taken together, could help improve the operating environment for the refining and import sectors.

These measures include the setting up of a new joint Government and industry midstream oil taskforce. This will provide a strategic and collaborative way of working and will deliver a number of the actions from the review. The taskforce will be independently chaired and draw its members from across the midstream oil sector.

DECC is also today publishing the Government response to our consultation on the future management of the compulsory oil stocking mechanism in the UK. In this the Government set out their support for the establishment of an industry-owned and operated central stocking entity in the UK which will encourage a more efficient system that incentivises the development of UK oil storage capacity. There are still important issues to address before the Government can agree to move to legislation, and so we are now asking obligated companies to prepare a road map towards legislation, addressing these issues.

The review and the Government response to the consultation can be viewed at: https://www.gov.uk/government/consultations/call-for-evidence-role-of-uk-refining-and-fuel-import-sectors and https://www.gov.uk/government/consultations/future-management-of-the-compulsory-stocking-obligation-in-the-uk respectively. Copies of both publications have been placed in the Library of the House.