101 UK Brexit Notes

Connemara Programme October 16 2018 pg. 133  The European Communities (Designation) Order 1988  Section 36C (2) of, and paragraph 1(3) of Schedule 8 to, the Electricity Act 1989  Section 4(1) & (2) of the Petroleum Act 1998  Sections 2(1) to 2(4) & 7(9) of, and paragraphs 1 to 19 & 20(1) of Schedule 1 to, the Pollution Prevention and Control Act 1999 Oil stocking obligations Before 29 March 2019 The UK has two 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 th e 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. After March 2019 if there’s no deal In a ‘no deal’ scenario, 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 Directive will no longer apply. The International Energy Agency levels of oil stocking obligation, at 90 days of net imports, apply to 30 member countries, which include the United States, Japan and Australia, among others. The volume of oil stocks held by those countries is considerable, but it is the collective action capability of all countries along with functioning markets that is most effective in ensuring our oil security and, while UK oil stocks held towards our obligations will reduce by moving from the EU’s higher (consumption-based) level, the UK will still be able to take part in collective actions if necessary. Such collective actions are very rare and have only taken place three times since the 1970s. Implications The UK will continue to meet its International Energy Agency obligations in a ‘no deal’ scenario. Therefore, the government will reduce overall obligations on companies as soon as practicable, while maintaining a level of stocks still 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 by EU exit. The UK intends to be able to access international ticketing arrangements, which supports 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 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 the point that the UK exits the EU. International tickets for oil stocking are already available to sell to Australia and New Zealand under existing Memoranda of Understanding (MOUs) and neither arrangement will be affected in a ‘no deal’ scenario. Actions for businesses and other stakeholders There will be changes for companies meeting UK obligations for oil stocking. Levels of obligation will be communicated in the first quarterly direction given to obligated companies following the UK’s exit from the EU. Businesses will follow the established processes for meeting and reporting obligations. Companies may want to ensure that they assess the risk of not being able to purchase tickets from EU countries to meet UK obligations. However, 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 for a ‘no deal’ scenario (as referenced in the ‘Before 29 March 2019’ 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 April 2019 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.