The Government has been urged to take measures to boost the oil refining industry as it struggles to compete under the “burden” of regulations.
The Energy and Climate Change Committee said it had received evidence which painted a picture of an industry in “decline”, with refineries being disadvantaged against European and global competitors.
The MPs said their inquiry found a “mismatch” between UK refinery supply of petroleum products and demand, with the shortfall made up by imports.
The select committee said much of the “considerable” investment in the refining industry was spent on compliance with legislative and regulatory requirements.
The Department for Energy and Climate Change (Decc) was urged to use a review of UK oil refining to look at access to finance to help the industry invest.
“The scale of legislative and regulatory burdens on the industry may undermine long term sustainability,” said the MPs’ report.
Sir Robert Smith, (Liberal Democrat, West Aberdeenshire and Kincardine), acting chairman of the committee, said: “The aim of our inquiry was to gather evidence and make recommendations ahead of Decc’s review of UK oil refining which is expected to be published toward the end of this year. In particular, we examined the pressures on industry and the implications for security of supply.
“Since 2009, two refineries have closed and the UK currently has seven refineries in total. Domestic production cannot keep pace with rising demand, especially for diesel products.
“We heard that the UK is reliant on imports for 56% of its jet kerosene. Such reliance on imports could have significant implications for energy security and resilience. It is also worrying for the estimated 26,000 jobs connected to the oil refining industry in the UK.
“It is clear that a level playing field must be established for all operators if UK oil refining industry is to continue growing. Witnesses highlighted that the transportation duty regime could disadvantage UK refiners. Such disparities should be remedied wherever possible.
“The UK needs to maintain the health of its refining industry. A mix of domestically refined products and imports is an important ingredient of energy security and the UK refining industry is a welcome provider of jobs and tax revenue for the economy. We agree with witnesses who called for Government to set a long term framework for the industry to help secure its future.
“A clear Government message and policy can provide oil companies with the confidence and incentive to continue operating refineries in the UK, and to continue investing to maintain a viable UK refining industry in the future. While the regulation of the industry for environmental and health and safety reasons is clearly essential, Government has a responsibility to ensure that it is also rational, co-ordinated, and designed to minimise the cost implications for industry.”
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