Written statement to Parliament

UK Downstream Oil Sector

This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government

Written Ministerial Statement by Michael Fallon on the Downstream UK Oil sector

The Rt Hon Sir Michael  Fallon MP

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 Task Force. This will provide a strategic and collaborative way of working and will deliver a number of the actions from the review. The task force 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 sets out its 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 roadmap towards legislation, addressing these issues.

The review and the government response to the consultation are available on the DECC website.

Copies of both publications have been placed in the Library of the House.

Published 9 April 2014