Running an oil or gas business
Published 31 December 2020
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This document explains to businesses engaged in energy sector activities (such as oil and gas exploration and production operations), and companies obligated under the UK’s Compulsory Stockholding of Oil regime, how the legislation applies from 1 January 2021.
Summary
There are changes for companies meeting UK obligations for oil stocking. Levels of obligation from 1 January 2021 will be communicated to obligated companies as soon as possible. Businesses should follow the established processes for meeting and reporting obligations.
The UK will continue to run a flexible system for oil stocking. Domestically traded tickets - effectively commitments to hold oil stocks on behalf of another party - are not affected.
There are changes for companies holding stocks on behalf of other countries.
Hydrocarbons licensing and environmental protection
The established legislative regimes for hydrocarbon licensing and environmental protection continue to operate.
Implications
The government has amended the relevant legislation to ensure broad continuity. The Pipe-lines, Petroleum, Electricity Works and Oil Stocking (Miscellaneous Amendments) (EU Exit) Regulations 2018 entered into force on 1 January 2021.
The legislative changes will have no impact on energy sector businesses, whose residual obligations under the legislation covered will remain unaltered.
Actions for businesses and other stakeholders
UK and EU businesses will not be required to take any action.
Further information
For further information on the government’s legislative regimes (administered by the Department for Business, Energy and Industrial Strategy) see the information pages relating to oil and gas licensing and environmental protection as well as nationally significant energy infrastructure projects.
Oil stocking obligations
The UK is a member country of the International Energy Agency and remains bound by International Energy Agency oil stocking obligations for 90 days of net imports of oil (as defined under the International Energy Agency’s International Energy Programme). The requirements of the EU Oil Stocking Directive 2009/119/EC no longer apply.
Implications
The UK will continue to meet its International Energy Agency obligations, maintaining a level of oil stocks widely considered to be appropriate to protect against oil disruption.
The UK will continue to run a flexible system for oil stocking. Domestically traded tickets - effectively commitments to hold oil stocks on behalf of another party - will not be affected. The UK intends to be able to access international ticketing arrangements, which support our existing flexible system, but there is a risk that EU traded tickets held by UK obligated companies may no longer operate as they do now, and that companies will lose the ability to access all the EU market for tickets. This risk and BEIS’ planned mitigation actions are explained further below.
UK-to-EU country tickets do not count towards EU obligations from 1 January 2021.
Actions for businesses and other stakeholders
There are changes for companies meeting UK obligations for oil stocking. Levels of obligation from 1 January 2021 will be communicated to obligated companies as soon as possible. Businesses should follow the established processes for meeting and reporting obligations.
There are changes for companies holding stocks on behalf of other countries. Obligated companies may wish to consider the risk of UK stocks not being eligible to count towards EU obligations. The EU requires that stocks held towards its obligation must be held in EU countries and so EU entities will no longer be able to count UK located stocks. This may mean that buyers of such tickets may consider cancellation of existing tickets.
International tickets for oil stocking are available to sell to Australia and New Zealand under existing Memoranda of Understanding. Future Memoranda of Understanding may also be bilateral (in that tickets can be bought and sold), although the immediate ambition is to ensure adequate purchasing potential for UK companies to ensure the UK meets its obligations.
More information
BEIS has written to all obligated companies and known oil stockholding stakeholders regarding this guidance and continues to engage with the sector. Companies that wish to be kept up-to-date on the latest oil stocking news should email downstreamoilteam@beis.gov.uk to be added to the distribution list for updates.