This year finds the UK refining sector facing the same extremely testing conditions that it has faced for the past decade, but the pressure on refining has increased dramatically. Towards the end of 2014, we saw the closure of Murco’s Milford Haven refinery as an operational facility following four long years of attempted sale. Murco is to be praised for its persistence and goodwill towards its loyal workforce in tirelessly continuing with a sale policy up to the end. At the time of writing, UKPIA’s thoughts are with the employees in Pembrokeshire seeking alternative positions locally and further afield.
The commercial environment for refineries across Europe cannot be directly blamed for the closure of Milford, but it certainly did not help. UKPIA members are looking towards the joint government and industry Midstream Oil Task Force, established in the wake of DECC’s review of the sector, to deliver some tangible improvements to UK refiners and soon.
One of the key tasks now under way through the Task Force is a robust third party review of the UK’s downstream oil resilience (the ability of UK supply to recover from severe global supply disruption), as opposed to supply security (the ability to obtain finished oil products from a number of sources). The former requires significant infrastructure and manufacturing to be in place, while the latter is achievable, in good times, but subject to constraint when the going gets tough.
There has certainly been a misplaced reliance on ’market forces’ when it comes to the UK oil supply infrastructure and other manufacturing assets. However, market forces are random and undirected an axe, not a scalpel and outcomes cannot be controlled. What is abundantly clear is that crude oil is unusable in its natural state. Refineries are needed somewhere to make products that consumers need, and having an indigenous refining base is strategically important. It is to be hoped that the resilience study will highlight the importance of ensuring a sound refining base in the UK, not by subsidy or state aid, but by encouraging refining companies to invest. This can be done by rationalising UK and EU regulation and mitigating policy that leads to domestic manufacturing closures, particularly when oil products will remain a vital part of our energy mix for many years to come.