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Daily Telegraph: Refiners urge Brown to rethink

By Roland Gribben (Filed: 30/01/2006)
Pressure is growing on the Government to end opposition to the creation of a new agency to control Britain's strategic oil stocks, amid worries about the future of the refinery business.
The Chancellor Gordon Brown has been reluctant to support the move because he is concerned the Government may end up being exposed to a huge financial obligation by effectively underwriting the oil stocks.
BP, Shell, Esso and independent oil companies along with importers and petrol retailers, including Tesco and Sainsbury, are attempting to persuade him to change his mind, and pointing out that by adopting the Stockholding Agency framework used in other EU states the Government will not be exposed to financial risk.
At present, oil reserves are held by oil companies without any cost to the Government, although Alan Johnson, Trade and Industry Secretary, is responsible for administering them.
Under existing rules BP, Shell and other oil majors with refineries in Britain are required to hold the equivalent of 67.5 days' sales while supermarkets and other non-refiners have a smaller 48.5 days' obligation.
Oil companies and supermarkets believe an agency would be better placed to administer stocks and ensure they were meeting obligations. They feel their arguments have been reinforced by confusion surrounding specific stocking requirements covering particular products.
One industry executive said: “It's very frustrating. We've been talking to the Government about setting up the agency for three years now and there's been little progress.”
The unity in the industry on the agency issue masks wide differences between the oil majors and supermarkets on other stocking and strategic issues. BP and Shell are pressing the DTI to end the stocking differential with supermarkets and refiners, arguing that Britain is the only EU country with a two-tier system.
They maintain the current set-up is anti-competitive, penalises domestic refineries, and will not survive changes in the industry or the longer-term need to fall in line with the EU's 90-day stock obligation. Britain has been given a dispensation because North Sea oil provides a “reserve cushion”, but as offshore production runs down stocks will need to rise.
Supermarkets, faced with a massive bill to bring them into line and anxious to protect their 33pc share of the petrol market, have mounted strong opposition to the move. They have told ministers that “big oil” is trying to shackle them and undermine their competitive position

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