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The paper outlines the responses received to the consultation on the future management of the compulsory oil stocking obligation (CSO) in the UK, and the government response to this.
Part One of the consultation sought views on the possible establishment of an industry-owned and operated Central Stocking Entity (CSE) in the UK. The majority of respondents were highly supportive of the establishment of such a CSE, with mandatory membership for obligated companies. A CSE could manage the CSO more strategically, help improve transparency of CSO costs and incentivise the development of storage capacity in the UK. There were some concerns raised though that the governance of such a CSE would need to be addressed carefully. The response sets out that government agrees that an industry-owned and operated CSE should be established in the UK, with membership mandatory for obligated companies, but that before government can agree to legislate for this obligated parties will need to work together to prepare a roadmap for the CSE to present to government. If the UK government is convinced it presents a robust approach, then it will seek to take forward the necessary legislation as soon as parliamentary time allows.
Part Two of the consultation asked for information on broader possible changes to UK CSO policy, such as changes to rules on the location and composition of stocks. Strong concerns were raised by respondents about the potential impact of any changes here on the cost of meeting the obligation. The government response sets out that it does not propose to make further specific changes at this time, but will keep these issues under review.
The UK is required to hold emergency stocks of oil products to release to market in the event of short term oil supply disruptions, known as the compulsory stock obligation (CSO). Currently Government issues individual directions to business. There are concerns the present system creates under investment in adequate storage, posing a long-run risk to resilience, and may harm the ability of the UK to meet the CSO in the long run.
The policy objective is to ensure that the CSO continues to be met in the future in the UK, as the overall obligation increases in response to declining UKCS production and to ensure the UK holds and can deploy sufficient emergency stocks effectively to mitigate the detrimental impacts on the UK or any oil supply disruption. This supports Government’s security of supply objectives.
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Department of Energy & Climate Change
Third Floor Area E
3 Whitehall Place
London, SW1A 2AW
Tel: 0300 068 2924
Your response will be most useful if it is framed in direct response to the questions posed, though further comments and evidence are also welcome.
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