I will this morning lay before Parliament a draft Downstream Oil Resilience Bill which introduces measures that will enable Government to support industry in ensuring the resilience of the fuel supply sector, prevent supply disruptions and maintain the security of fuel supply to consumers.
The sector is currently efficient, flexible and effective in ensuring the continuity of fuel supply and we do not currently expect any disruption to this. We need to ensure that we protect the continuity of fuel supply and that we are prepared and resilient to disruptions when they do occur. The measures set out in the draft Bill will help ensure that critical services and consumers will continue to receive the fuel on which they rely and will reduce the risk of disruption to economic activities from the loss of fuel supplies.
This draft Bill follows a public consultation in 2017, where Government explored options to address sector resilience and concluded that due to high levels of global competition, the sector has gone through a process of restructuring to remain internationally competitive which has reduced its spare capacity. This means that there is an increased risk of market disruption in the downstream oil sector, given the lower capacity to react to sudden supply and demand shocks.
The fuel supply system faces a number of inherent risks, including accidents, severe weather, malicious threats, industrial action, and financial failure. The Government work with fuel suppliers to mitigate such risks and, while individual companies have a good record of managing their own risks, they do not see a commercial return in managing low probability, higher impact risks.
The publication also marks the first step towards the commitment made in the Energy White Paper ‘Powering our Net Zero Future’ to take powers to ensure we maintain a secure and resilient supply of fossil fuels during the transition to net zero emissions. As set out in the Energy White paper and in line with the recommendation from the independent Climate Change Committee, we will decarbonise our energy system, boosting the production of clean energy. The sixth carbon budget will ensure Britain remains on track to end its contribution to climate change. Ensuring a reliable and secure fuel supply to essential services in coming years will be critical and therefore primary legislation is required to build adequate resilience across the whole supply system.
The Integrated Review 2021 sets out our goals to build a more robust position on national security and resilience in order to reduce the impact of shocks and long-term challenges on the life and livelihoods of UK citizens. The Bill is aligned with the Integrated Review’s objectives and outlines solutions to address the current and future risks to the downstream oil sector because we need to ensure that there is a supply of secure, affordable and clean energy which is essential to the UK’s national interests.
The Bill will help the Government identify risks of disruption to the UK fuel supply market in advance and ensure that Government and industry together can implement effective and proportionate contingency plans as early as possible. This includes mandating the provision of information to Government to allow better risk assessment and the design of appropriate mitigating measures, and direction powers that will allow the Government to intervene where supply resilience is compromised, or there is a significant risk that it will be, and the industry has not taken any action. The Bill also introduces new powers that allow the Government to ensure that anyone taking control of critical infrastructure in this sector has appropriate financial and operational measures in place, and a new spending power to allow Government to provide financial assistance to support sector resilience and ensure continuity of supply, where such support is deemed necessary and value for money.
The Bill will apply to all operators and infrastructure in the downstream oil sector with a supply handling capacity above the thresholds which are outlined in the Bill. My Department will continue to work with industry to refine the proposed measures, so that the disruption to market functioning is minimal.
The Bill will also ensure that there is a reliable energy supply and increased resilience which means that the downstream oil sector is able to protect against, react to and recover from any disruption.
The draft Bill will be published with accompanying explanatory notes and an assessment of the potential impacts. The draft Bill will undergo pre-legislative scrutiny by the Business, Energy and Industrial Strategy Committee to ensure that it is robust and workable.