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6 comments on Parliament Debates Gas Situation

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Stuart Staniford on March 16, 2006 - 4:48am Permalink | Subthread | Comments top
I don't have too much of a dog in this political fight any more, not having lived in the UK for many years. From the across-the-Atlantic perspective, it looks to me like the government has been extraordinarily lax to get itself into a situation where the strategic reserve is as small as the Rough facility sounds like, and that facility is a single point of failure. No doubt the minister has no choice but to defend his conduct as best he may, but "knife edge" certainly sounds appropriate when one is having to worry about balancing supply and demand on a day-by-day basis, with prices having gone through the roof.

Does the UK have any strategic reserve for oil?

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haggisbasher on March 16, 2006 - 8:15am Permalink | Subthread | Parent | Comments top
The answer given in parliament by Malcolm Wicks, Secretary of State for Trade and Industry, on 19th Jan, describes the situation in the UK quite well.

Malcolm Wicks: The UK meets its international obligations to hold stocks of oil for use in the event of disruption of supplies by imposing obligations on companies. We believe that stocks held by companies are, in the event of an emergency, likely to be where they will be needed and capable of being quickly processed into the supply chain. The release of stocks following Hurricane Katrina has shown that the UK system was able to respond well to the disruption which occurred.

The UK is currently required to hold stock equivalent to 67.5 days annual consumption, both in total and also in each of the three categories into which the total is divided. Obligations are based on sales. Changes in the market, with small companies below the threshold for the obligation entering a supply chain previously
dominated by oil companies, meant that between March 2000 and October 2004, although the UK met the total obligation in all but two months, in 41 of the 56 months we did not hold the full level of stocks necessary to meet that part of the obligation relating to category 2 (gas oil, diesel oil, kerosene and kerosene based aviation fuels). In order to return to full compliance with the UK obligations the Government agreed increases in company obligations with industry, and the UK has been fully compliant with the obligations since November 2004.

We must, however, consider future needs. The UK's obligation will increase as our domestic production of oil declines. We have, therefore, consulted the oil industry and others about a new system which will ensure that the UK can continue to meet its obligations in future. We propose that this system should be based on products from refineries or entering the UK as imports. As we work with the industry to establish the system, we have agreed to explore the long-term potential of establishing an agency to ensure that stocking obligations are met.

There have recently been calls for a EU strategic reserve on similar lines to that in the US, led by Laslo Kovacs, Energy Commisioner for the EU, but whether this will get beyond the talking stage remains to be seen.

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