Oil and Gas Business 2021 UK Guidance

Guidance

Running an oil or gas business from 1 January 2021

Published 13 September 2018

New rules for January 2021

Contents
Summary of actions
Hydrocarbons licensing and environmental protection

Oil stocking obligations

This notice explains to businesses engaged in energy sector activities (e.g. oil and gas exploration and production operations), and companies obligated under the UK’s Compulsory Stockholding of Oil regime, how existing legislation will apply from 1 January 2021.

Summary of actions

There will be changes for companies meeting UK obligations for oil stocking. Levels of obligation from 1 January 2021 will be communicated to obligated companies as soon as possible. Businesses will follow the established processes for meeting and reporting obligations.

The UK will continue to run a flexible system for oil stocking. Domestically traded tickets – effectively commitments to hold oil stocks on behalf of another party – will not be affected. However, companies may want to ensure that they assess the risk of not being able to purchase tickets from all EU countries to meet UK obligations.

Hydrocarbons licensing and environmental protection

Before 1 January 2021
Legislation introduced through Parliament in accordance with various Acts sets out the requirements of the Environmental Impact Assessment Directive, Industrial Emissions Directive, the Hydrocarbons Licensing Directive and Oil Stocking Directive on the UK’s energy sector.

Businesses engaged in the sector are required, for instance, to minimise the environmental impact of the offshore oil and gas industry and BEIS also needs to ensure the continued licensing (by the Oil and Gas Authority) of areas to explore and exploit potential oil and gas reserves offshore in the UK Continental Shelf and onshore in England.

Onshore oil and gas licensing in Scotland, Northern Ireland and Wales is devolved.

From 1 January 2021
The established legislative regimes for hydrocarbon licensing and environmental protection will continue to operate.

Implications

The government will amend the relevant legislation to ensure broad continuity. This will be achieved by the entry into force on 1 January 2021 of the Pipe-lines, Petroleum, Electricity Works and Oil Stocking (Miscellaneous Amendments) (EU Exit) Regulations 2018 which were laid on 10 December 2018.

The legislative changes will have no impact on energy sector businesses, whose residual obligations under the legislation covered will remain unaltered.

Actions for businesses and other stakeholders

UK and EU businesses will not be required to take any action.

Further information

For further information on the government’s legislative regimes (administered by the Department for Business, Energy and Industrial Strategy’s Energy Development and Resilience Directorate) see the information pages relating to oil and gas licensing and environmental protection as well as nationally significant energy infrastructure projects.

Oil stocking obligations

Before 1 January 2021
The UK has 2 international obligations to hold emergency oil stocks that can be released in response to disruptions to the oil market, as required by the International Energy Agency (IEA) and by the EU Oil Stocking Directive 2009/119/EC (‘the Directive’). The Directive requires a higher level of oil stocks to be held than the International Energy Agency. The Directive also requires one-third of emergency stocks to be held as finished oil products (such as diesel or motor gasoline).

To meet its obligations, the UK requires suppliers to the UK market to hold oil stocks. Under the Directive, the stocks can be held anywhere within the EU on the UK’s behalf (and the UK can also hold oil stocks on behalf of other EU countries). The system is underpinned by reporting requirements to the Department for Business, Energy and Industrial Strategy.

From 1 January 2021
The UK will continue to be a member country of the International Energy Agency and will remain bound by International Energy Agency oil stocking obligations for 90 days of net imports of oil (as defined under the International Energy Agency’s International Energy Programme). The requirements of the EU Oil Stocking Directive 2009/119/EC will no longer apply.

Implications

The UK will continue to meet its International Energy Agency obligations, maintaining a level of oil stocks widely considered to be appropriate to protect against oil disruption.

The UK will continue to run a flexible system for oil stocking. Domestically traded tickets – effectively commitments to hold oil stocks on behalf of another party – will not be affected. The UK intends to be able to access international ticketing arrangements, which support our existing flexible system, but there is a risk that EU traded tickets held by UK obligated companies may no longer operate as they do now, and that companies will lose the ability to access all the EU market for tickets. This risk and BEIS’ planned mitigation actions are explained further below.

UK-to-EU country tickets will not count towards EU obligations from 1 January 2021.

Actions for businesses and other stakeholders

Companies may want to ensure that they assess the risk of not being able to purchase tickets from all EU countries to meet UK obligations. Government will also look to ensure international (inward) ticketing is still possible by seeking to sign Memoranda of Understanding.

There will be changes for companies holding stocks on behalf of other countries. Obligated companies may wish to consider the risk of UK stocks not being eligible to count towards EU obligations in their planning (as referenced in the ‘Before 1 January 2021’ section above). The EU requires that stocks held towards its obligation must be held in EU countries and so EU entities will no longer be able to count UK located stocks. This may mean that buyers of such tickets may wish to purchase fewer tickets ahead of 1 January 2021, or consider cancellation of existing tickets given the risk of a no-deal.

International tickets for oil stocking are already available to sell to Australia and New Zealand under existing Memoranda of Understanding and neither arrangement will be affected in a no-deal scenario. Future Memoranda of Understanding may also be bilateral (in that tickets can be bought and sold), although the immediate ambition is to ensure adequate purchasing potential for UK companies to ensure the UK meets its obligations.

More information

BEIS has written to all obligated companies and known oil stockholding stakeholders regarding this guidance and continues to engage with the sector. Companies that wish to be kept up-to-date on the latest oil stocking news should email downstreamoilteam@beis.gov.uk to be added to the distribution list for updates.

For further information please visit the GOV.UK pages for oil stocking.