TWO UK refineries could close if the UK leaves the EU without a deal, a leaked government report has warned.
The findings come as part of the UK Government’s contingency planning for a no-deal Brexit, code-named Operation Yellowhammer. If the UK leaves without a deal on 31 October, the report warns that tariffs imposed on fuels exported from the UK will make refineries uncompetitive. It predicts that two of the UK’s six refineries would close, and be converted to import terminals, and around 2,000 people would lose their jobs.
Currently, petroleum products are traded without tariffs between the UK and EU, but it’s expected that in the event of a no-deal Brexit, the EU would impose World Trade Organisation (WTO) tariffs on UK exports, including a 4.7% tariff on gasoline. Meanwhile, the UK Government policy is to set a 0% tariff on most imports to the UK including for petroleum products. While this would be a temporary situation, there are concerns that the disparity could have significant impact on the tight margin sector.
While the UK Petroleum Industry Association would not be drawn on the risk of no deal forcing the closure of its members refining sites, its Director-General Stephen Marcos Jones said: “Allowing UK refineries to compete on a level-playing field with EU refineries is a priority that government should address now in order to avoid and mitigate any potential upheaval from no deal.”
Around 38% of the output of UK refineries was exported in 2017, data from UKPIA shows. By product, the UK was a net exporter of gasoline (6.9m t) and petroleum gases (1.9m t) and a net importer of diesel (11m t) and aviation fuel (8.8m t).
Refining experts at Wood Mackenzie and Facts Global Energy told Bloomberg that refiners would likely respond by redirecting exports to the domestic market, and cast doubts over the Government’s warning that refineries would close.
Commenting on possible fuel shortages, Jones said: “UKPIA does not anticipate any fuel supply disruptions as a result of a no-deal Brexit.
“The sector continues to make every preparation possible to cope with potential disruptions in the event of a no-deal Brexit, including stockpiling of essential materials, to limit any conceivable short-term impacts on consumers.”
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