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Consultation on UK’s oil stocking system underway

Hydrocarbon Engineering,


A government consultation was launched last week, inviting industry professionals to contribute their views on whether the present obligation on suppliers to hold stocks is the most efficient way of managing the UK’s oil stocking obligations.

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 compulsory stock obligation (CSO). Currently, the government issues demands to business in order to satisfy the CSO; since 2006, refiners have been required to hold 67.5 days of stock; non refiners are required to hold 58 days of stock.

However, there are concerns that the current system generates under investment in adequate storage, posing long term risks for the UK’s ability to meet the CSO. DECC secretary Edward Davey has described the consultation in terms of an attempt to ensure that the UK oil stocking system continues to follow best practice and remains fit for purpose.

An alternative to the current arrangement would be to create a centralised stocking agency, such as already exists in several other EU states.

The Downstream Fuel Association (DFA) has expressed approval of the DECC decision to conduct the consultation, while the Director of the UK Petroleum Agency (UKPIA) has commented explicitly in favour of a centralised stocking agency.

Responses are requested by no later than 7 June 2013, and can be emailed to deccdownsteamoilteam@decc.gsi.gov.uk.

Background

As a EU member state, the UK is obligated under the Oil Stocking Derivative to hold oil stocks at a high of 61 days average daily inland consumption or 90 days of average net daily imports.

Membership of the International Energy Agency (IEA) also commits the UK to maintaining emergency oil reserves equal to 90 days of net imports.

However, the same stocks can be utilised to satisfy the requirements of both of the above obligations. Furthermore, the UK’s status as an oil producer reduces the country’s dependence on daily imports. Hence, the highest obligation that the UK must meet is the EU 61 days of average consumption requirement.

To put this in perspective, at the time of the Energy Trends survey conducted in March 2013, the UK had stocks equal to approximately 84 days average consumption (11 500 000 t).

Edited from various sources by Emma McAleavey

Read the article online at: https://www.hydrocarbonengineering.com/gas-processing/11042013/under_review_consultation_on_uk_oil_stocking_system_underway/


 

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