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HMRC internal manual

Oils Technical Manual

Introduction and overview of oils activity: background to UK oils activity: Processing and distribution

Both crude oil and finished oil products, including biofuels, may be imported into the UK from 3rd Countries, or sourced in or via other EU member states.

Crude oil and semi/finished oil products are traded internationally. Oil has an advantage in that it can be produced and then delivered to markets anywhere in the world. Normally crude oil and natural gas (NG) are imported and used to produce the oil products required in the country of consumption.

Crude oil is delivered mainly by ship to refineries in the UK by the oils majors, who explore for and extract crude oil world-wide. Crude oil and NG are extracted from the North Sea, and imported by pipeline or by tanker from both the UK’s Continental Shelf and from the Norwegian Sector.

In future Liquefied Natural Gas (LNG) will also be imported from the Far East.

NG consists mostly of methane, which can be used for heating and cooking and as a road fuel when compressed (CNG). NG contains other hydrocarbons, which can be collected as Gas Condensate when extracted from Gas pipelines, or removed during processing.

Small amounts of Crude Oil are produced at Wytch Farm in Poole Harbour. There are also a few other small on-shore producers in the UK mainly in southern and eastern England.

Finished oil products can either be purchased from the oils majors in the UK, or on the ‘spot market’ in Rotterdam. Semi-finished oil products may also be imported from abroad for further processing, mixing or blending.

Most crude oil is received into motor and heating oil (mineral oil) producers’ premises, where it is used to produce a variety of oil products. Both finished and semi-finished oil products may be received into producers’ premises as ‘process’ oils.

As well as being imported direct to the UK from 3rd Countries outside the EU, mineral oils can be imported via other EU member states, or be supplied from within the EU.

Since the introduction of the RTFO (Renewable Transport Fuel Obligation), administered by the Department for Transport, road fuel is legally obliged to contain a proportion of biofuel. The combination of hydrocarbon oil and, currently, 5% of biofuel, is known as ‘bioblend.’

Biodiesel is added to heavy oil, and bioethanol is usually added to light oil (petrol). Bioethanol is technically an alcohol rather than an oil, for tax purposes, until it is denatured and / or set aside as an oil product. See Notice 179E section 3 for more information on bioethanol, and the whole of 179E for biofuel generally.