UK's downstream resilience bill gets cautious welcome from refiners, pump owners

UK government proposals for new powers to better monitor the country's downstream fuel markets and preempt potential supply disruptions have received a cautious reaction from refiners and downstream players.

The draft Downstream Oil Resilience Bill, which was introduced last month by energy minister Anne-Marie Trevelyan, forms part of long-delayed legislation to better protect fuel supply resilience in Europe's second-biggest fuel market. Its key provisions would require the industry to notify government of any actual or threatened disruption to fuel supplies and take any measures needed to "keep critical infrastructure operating."

The draft legislation states that the new powers would be used only as a "back-stop" to protect fuel supply resilience "when required." No new requirements are sought to control operator crude or fuel inventory levels.

The UK refining sector association UKPIA said it is reviewing the draft but cautioned that any new government powers should ensure UK companies can remain competitive on the global market.

"History shows that UK companies, when able to compete globally have been able to offer fuels supplies in the UK, that are highly resilient in the face of global or domestic risks," a UKPIA spokesperson said in an emailed response.

"...The Downstream Oil Resilience Bill is being assessed closely by UKPIA to ensure protection for the consumer whilst continuing to encourage the strong competitive forces that have ensured supply to date."

Oil-based fuels are currently the UK's main source of energy for transport (96%) and supplied over 44% of the UK's final energy demand in 2019.

But the government's existing powers to monitor and control fuel supplies are limited to the 1976 Energy Act only if there is an "actual or threatened emergency" to supplies and limited powers to intervene in mergers, on grounds of national security, under the Enterprise Act 2002.

Supply risks

Plans for a Downstream Oil Resilience Bill first emerged in 2017, seeking greater regulatory oversight of the ownership and operation of key fuel supply assets in the wake of the 2012 Coryton refinery insolvency and the 2005 Buncefield oil storage depot explosion. The government was concerned that existing laws would not allow it to act in advance of a crisis in order to prevent a problem occurring.

With UK oil demand in decline and an acceleration of the transition away from fossil-fuel-powered transportation to electric cars, the government said it is also keen to prevent any threats to fuel supplies as the vehicles and fueling infrastructure change.

"There are risks to this supply chain and the associated fuel infrastructure, including accidents, severe weather, malicious threats, industrial action and financial failure," the current draft bill states. "Our primary objective is ensuring that the United Kingdom has energy supplies that are reliable, affordable, and clean."

The draft legislation applies to UK refiners, importers, wholesalers and resellers supplying at least 50,000 mt of any petroleum product to the UK market on an annual basis or the owner of a downstream oil facility that has an annual capacity in excess of 20,000 mt.

The UK's Petrol Retailers Association welcomed the draft legislation, saying the planned new powers are "necessary irrespective of the emergency powers that may be granted under the Energy Act 1976 and the Civil Contingencies Act 2004."

The draft bill would also require downstream operators with an annual capacity of 1,000 mt to disclose requested information with the "purpose of maintaining or improving downstream oil sector resilience."

The bill also sets out requirements for companies gaining control of critical fuel infrastructure to be "financially and operationally fit for the task."