Documents considered by the Committee on 25 April 2018 Contents

8Emergency oil stocks

Committee’s assessment

Politically important

Committee’s decision

Cleared from scrutiny; drawn to the attention of the Exiting the EU and the Business, Energy and Industrial Strategy Committees

Document details

Commission Staff Working Document—mid-term evaluation of Council Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products

Legal base

Department

Business, Energy and Industrial Strategy

Document Number

(39302), 15130/17, SWD(17) 438

Summary and Committee’s conclusions

8.1In case of supply disruptions, EU Member States are obliged to maintain minimum stocks of crude oil and/or petroleum products, some of which may be held in other Member States. The UK currently holds around five million tonnes in other EU Member States (40% of its obligation) and holds around 500,000 tonnes belonging to other EU Member States. This EU obligation is in addition to similar obligations applied by the International Energy Agency (IEA),

8.2The Commission’s document assessed implementation of the EU Directive following amendment in 2009. In our report of 21 February 2018, the Committee raised a number of questions (see below), to which the Minister for Climate Change and Industry (Claire Perry) has now responded.

8.3In summary, the Minister considers that the EU Directive adds value to the IEA system, but notes that future options for engagement with EU policy in this area are subject to negotiations on the future economic partnership agreement between the EU and the UK.

8.4The Minister has responded to our various questions, but is clearly unable to provide any clear indication of future EU-UK arrangements in this area. While that is understandable given the stage of negotiations, we signal our continued interest in this matter. As we consider that it is likely to be of interest too to the Exiting the EU Committee and the Business, Energy and Industrial Strategy Committee, we draw this chapter to their attention.

8.5We clear the document from scrutiny and require no further information.

Full details of the documents

Commission Staff Working Document—mid-term evaluation of Council Directive 2009/119/EC imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products: (39302), 15130/17, SWD(17) 438.

Background

8.6Council Directive 2009/119 imposes an obligation on Member States to maintain minimum emergency stocks of crude oil and/or petroleum products. The Commission’s review of the Directive over the period 2009–16 found it to be effective and relevant. A number of suggestions were made for changes to the annexes so as to improve the Directive’s efficiency. Further details were set out in our report of 21 February.

8.7In the Government’s original EM, the Minister for Energy and Industry (Richard Harrington) said that none of the proposed changes was likely to be substantial. The suggestion regarding cross-border stocks was potentially the most significant. The result might be a light touch register to improve the reporting of cross border stocks. He concluded that any changes were largely technical and would not fundamentally impact on the UK’s ability to meet its international oil stocking obligations in the future.

8.8In our Report of 21 February, we noted that the Directive allows for some stocks to be held in other Member States and, as such, the UK both holds stocks for other Member States and has stocks elsewhere. Given this reciprocity, we considered that the UK’s exit from the EU is relevant to future oil stocking arrangements. We welcomed responses to the following queries:

The Minister’s letter of 29 March 2018

8.9The Minister for Climate Change and Industry (Claire Perry) considers that the UK’s oil supply chain continues to deliver security of supply and in the short-medium term is expected to continue to function well, with sufficient capacity to meet demand, as well as respond to supply shocks. She says that the UK is well placed in global oil markets (crude and product), trading extensively in all oil types and with significant import/export infrastructure on coastal locations able to source fuels from around the globe.

8.10Regarding the role of emergency oil stocks, she comments that these form an important contribution to UK energy security in extreme scenarios as part of coordinated actions with the International Energy Agency (IEA) and EU member states. The UK Government, she says, takes the requirement to adhere to international obligations seriously. She observes that, as a member of both the IEA and the EU, the UK has (complementary) obligations under both the IEA’s International Energy Programme (IEP) and under Council Directive 2009/112/EC. Oil stockholdings are most effective as part of coordinated international action so there is value, says the Minister, in bringing additional countries under the system, as the IEA and EU have done.

8.11Regarding the added value of the EU Directive, the Minister considers that the Directive adds value to the IEA system, through low barriers to cross-border stockholding and through a finished products requirement. Holding finished products has greater resilience benefits, she says, than just holding crude oil.

8.12Regarding future UK-EU cooperation in this area, the Minister comments:

“Our exact future relationship, including the scope of the Implementation Period, remains subject to negotiations with our EU partners. The UK expects to meet its international oil stocking obligations in line with current policy. Our policy remains to meet those obligations as flexibly as possible and we are considering all options for post Exit arrangements.”

8.13The Minister goes on to note that oil stocking under the EU Directive is to be considered under the future economic partnership agreement between the EU and UK and these discussions have not yet taken place. As for continued participation in the EU’s Coordination Group for oil and petroleum products, this also remains subject to negotiations.

8.14In response to the Committee’s question about the approximate additional cost of storing all UK stocks in the UK, rather than making use of excess capacity elsewhere, the Minister says:

“Under the EU Directive emergency oil stocks can be held anywhere within the EU, and under the IEA’s International Energy Programme there are no restrictions on location of stockholdings. Over one-third of the UK’s obligation is currently stored in other EU Member States (majority in the Netherlands) making use of excess capacity elsewhere.

“Given we are currently obligated to hold a lower level of stocks under the IEA, we have the capacity to hold stocks to meet the IEA obligation domestically if required (no additional cost). The IEA requires the UK to hold 90 days of net imports, whereas the EU Directive requires the UK to hold the higher of 61 days of inland consumption or 90 days of net imports (we are currently on the former). The Directive currently requires [at least] 12 million tonnes of oil equivalent (mtoe) to be held, the IEA [at least] 6mtoe; the difference is mainly due to North Sea production reducing our net imports although over time the two obligations will be the same.”

Previous Committee Reports

Fourteenth Report HC 301–xiv (2017–19), chapter 1 (21 February 2018).





Published: 1 May 2018