In 2013, the Ministry of Defence (MOD) included provisions in the Energy Act to enable sale of the Government pipeline and storage system (GPSS). During passage of the Bill, Government Ministers were clear that a final decision to sell the system had not been taken and was subject to further work to confirm the case for sale.
Given these assurances it is appropriate for me to provide an update to the House. Work on the sale was carried out in parallel with the legislative process and has extended into this year. MOD and its advisers have paid particular attention to assessing the investment required to meet the stringent safety and environmental standards introduced in the wake of the 2005 Buncefield accident as well as identifying the risks and opportunities for the business in the civilian downstream oil sector. It remains the case that commercial customers account for the majority of the GPSS throughput. MOD undertook market testing earlier this year and considers there to be a significant level of interest in purchasing the GPSS.
We have concluded that sale of the GPSS would allow Government to transfer the financial risks of operating in the downstream oil market to the private sector, while still preserving the GPSS’s military capability and ensuring that national resilience is not compromised.
The Department will now begin the sale process by inviting expressions of interest. The sale will be publicised in the press and through the defence contracts bulletin. MOD intends to complete the sale in the current financial year. The GPSS clauses contained within the Energy Act will be enacted by a commencement order before sale completion.
The Oil and Pipelines Agency which manages the GPSS on MOD’s behalf is today writing to key suppliers and customers informing them of the sale process.