UK’s Oil Stocking System to Be Reviewed

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The future of the UK’s oil stocking system is being considered by a consultation launched by Government.  Views are being invited on whether the present obligation on suppliers to hold stocks is the most efficient model or if an alternative system such as centralised stocking agency, similar to that of other EU member states, would be more appropriate.

Energy and Climate Change Secretary Edward Davey said: “The UK has a strong history ensuring a resilient and responsive oil stocking system that meets our international obligations and provides energy security.  As a member state of the EU and the International Energy Agency (IEA), the UK is required to hold emergency oil stocks for use in an oil supply disruption.” 

Positive response to consultation

The oil industry responded positively to the consultation.  UK Petroleum Industry Association (UKPIA) represents oil refining and marketing companies in the UK and Director General Chris Hunt said that UKPIA “welcomes the Consultation on UK’s Compulsory Stocking and would support the establishment of an independent stockholding agency to manage the obligations going forward.”

The Downstream Fuel Association (DFA) represents UK fuel supply chain companies and Chief Executive Teresa Sayers said: “The DFA supports the Government’s oil stocking consultation and in particular DECC’s consideration of a centralised stocking agency.  This is a unique opportunity to ensure the UK finds the most cost effective way to comply with its international oil stocking obligations.”

Quick facts about the Compulsory Stocking Obligation:

  • An EU Member State, under the terms of the Oil Stocking Directive, is required to hold oil stocks at the high of 90 days of average net daily imports or 61 days of average daily inland consumption;
  • Members of the International Energy Agency (IEA) commit to maintain emergency oil reserves equivalent to at least 90 days of net imports.
  • The same stocks can be used to meet both obligations so in practice the UK must meet the largest. The UK is an oil producer, which reduces reliance on daily imports, so the highest obligation the UK must currently meet is the EU requirement of 61 days of average consumption.
  • Official published figures in Energy Trends March 2013 showed the UK had stocks equal to around 84 days of average consumption.
  • Companies must supply at least 50,000 tonnes of oil to the UK market in order to be obligated.
  • Since 2006 refiners are required to hold 67.5 days of stock, whereas non-refiners (including importers and significant traders) are required to hold 58 days of stocks (primarily due to different operational models).
  • Under the terms of the Oil Stocking Order 2012, obligated companies are required to hold at least one third of their oil stocks in the form of one or more particular product categories.
  • The UK’s total Compulsory Stocking Obligation stocks currently held by obligated companies is over 11,500,000 tonnes.

For more information, help or advice on Energy issues please contact our Energy Team on 0191 211 7777.