Insight

The integrity of the UK oil supply system

Indigenous refinery production v inland market demand
Since 2000, diesel imports have risen from 16% of inland consumption to 44% and kerosene from 33% to 54%. By contrast, the share of motor spirit production exported has risen from 20% to 49% and that for fuel oil (including international marine bunkers) has increased from 55% to 95%. Exacerbating the motor spirit imbalance has been an increased import share, from 11% to 32%, which reflects the much expanded presence of the importing/wholesaling companies in the transport fuel sector (also a contributory factor in the rise of diesel imports).
Looking at the wider issue of import dependency, it is noteworthy that expert witness testimony to the recent Commons Energy & Climate Change Committee report was in broad agreement that a mix of domestically refined and imported products was essential for security of supply, the respective proportions being best determined by the market. So, the Committee advised DECC that, in its review, it should take an approach that reflects the integrated nature of indigenous refiners and importers as well as associated ancillary industries.
Is there substantive cause for concern?
Detailed below, the extensive physical infrastructure has been in place for many years, during which time it has been subject to much rationalisation. While enabling comprehensive market reach, it also has a commendable record of providing both security and continuity of supply, as well as helping the country to meet its compulsory stocking obligations.
The consequences, in terms of product supply dislocation, arising from disablement of the key Buncefield terminal in December 2005, bore testimony to the system’s resilience. That is not to say that there are not points of potential vulnerability; should there be loss of supply out of the Fawley refinery, the consequences for the South, the UK’s largest inland market region, are by far the most significant. The DECC review, to be completed by year end, is awaited with interest!
 

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Our four regional supply envelopes

Indigenous refining cover and capability to supply

The UK market is serviced from 47 distribution points (including 7 refineries), with approximate bulk product movements by coaster/sea fed (33%), pipeline (52%) and rail (15%). Below is an assessment of the key elements of the downstream supply chain – product sources/sourcing, supply lines from sources and market coverage.
South (SE, E & SW England and Greater London)
In deficit on all products, a situation worsened by Coryton’s closure in 2012. With import facilities close to capacity, any disruption of refining operations at Fawley could have serious repercussions. Supply is neither robust nor resilient; commissioning of the new Coryton import/distribution facility will help to alleviate this position.
The main supply points comprise four sea fed public storage facilities in the Thames and two pipeline fed facilities, at Purfleet and Staines, sourced from Fawley. Some material is supplied from a pipeline fed terminal at Buncefield and rail fed facility at Theale, while the southern part of the region is serviced by RTW from Fawley and Hamble. Further west, the market is supplied from two terminals at Avonmouth, one sea fed and one pipeline fed, and a rail fed facility at Westerleigh. Parts of the south west are also serviced from Avonmouth, with the lion’s share from two sea fed terminals at Plymouth, with some distillates only supplied from a sea fed facility at Falmouth.
Central (NE & NW England, Wales, Yorks/Humberside and E & W Midlands)
In surplus on all products except diesel, being readily accessible from most UK refining centres, deemed both robust and resilient.
Supply is largely serviced via three main pipeline networks – UKOP (Thames-Mersey), Mainline (Milford Haven/Pembroke refineries) and the Esso system (Fawley refinery). In the Midlands, these supply terminals at Northampton, Bromford and Kingsbury (3 facilities), with one of the Kingsbury terminals also rail fed from Humberside, from where products are also moved by rail to a terminal at Nottingham. There is also a rail fed terminal at Bedworth. The north western part is largely supplied from Stanlow refinery, supplemented by two pipeline fed terminals in Manchester, a sea fed public storage facility at Eastham and a rail fed terminal near Carlisle. Yorkshire/Humberside is serviced by two refineries at Killingholme and a sea fed public storage facility at Immingham (which can also receive directly from two nearby refineries). The north east is supplied by two sea fed public storage facilities on Teesside and one on Tyneside and a rail fed terminal at Jarrow, with material also sourced out of the two Humberside refineries. The market in south Wales is serviced from three sea fed facilities in Cardiff, while the north is supplied out of Stanlow and Manchester.
Scotland
Similar in terms of cover to Central, so is deemed robust, but lacks resilience owing to the capacity of existing terminals being insufficient to compensate for loss of Grangemouth refinery supply.
Most central belt requirements are supplied from Grangemouth refinery, supplemented by sea fed public storage terminals at Grangemouth (also fed from the refinery) and on Clydeside. Further north, the market is serviced from sea fed terminals at Aberdeen (2 facilities, one distillates only), Peterhead (distillates only) and at Inverness.
Northern Ireland
Entirely dependent on imported sources, it relies largely on supplies from Central and, to a lesser extent, Scotland.
The main supply sources comprise two sea fed facilities in Belfast, one of which is public storage, with the western part of the region also serviced from a sea fed facility in Londonderry.