INDUSTRY INSIGHT
A look at the shape of the future UK downstream oil sector landscape
We are living through a time that has heralded much change and , before considering the future evolution and shape of the UK downstream oil sector , we will remind ourselves of the substantial amount of change that has already occurred in this current millennium .
Four particular developments are noteworthy :
• The ‘ Majors ’ no longer enjoy the dominant position prevailing in the second half of the 20th century , when they supplied circa 55-60 % of the inland market , with the exception of the aviation fuel sector , where they continue to significantly dominate the country ’ s two main airports , Heathrow and Gatwick .
• The refinery network has diminished in size from 9 facilities to 6 .
• The middle ‘ tier ’ of the landscape has seen a number of ownership changes resulting in new or different participants .
• The market position of the wholesalers / importers has grown substantially , from around a 7 % share at the start of the millennium , to between 35-40 % and even higher in ground transport fuels ( circa 45 %). Two companies have featured especially prominently : - Greenergy , which started in 1992 , is now the market leader , with national distribution coverage and a particularly strong position in the supply of products to supermarkets ( especially Tesco & Sainsbury ) which , as a group , now supply around 45 % of the road fuel market ( vs . around 6 % in 1990 ). - Certas Energy is a wholly owned subsidiary of Dublin based FTSE100 company , DCC , which entered the market in 2001 by buying BP equity distributor , Scottish Oils , and then , over the ensuing 15 years , embarked on an ambitious distributor acquisition programme , which included the equity distributor businesses of Shell ( Shell Direct ), Texaco and Total ( Total Butler ).
The chart below provides a summary of the landscape ’ s evolution over the past 11 years .
Looking ahead We will now consider the main developments that are expected to determine the shape of the sector up to the end of the current decade , looking at its principal component parts .
DEVELOPMENTS IMPACTING ON THE FUTURE SHAPE : The over-arching development that will play the central role will be the pace of the energy transition away from all fossil fuels towards renewable sources . Taking the main components of the downstream oil sector in turn :
Refining : There are currently six refineries supplying the UK market , all of which were originally commissioned 50 + years ago , but how many will be required by the end of the decade ? Especially in the light of the following :
• The expected ‘ trajectory ’ of inland product consumption : while levels are projected to largely recover from last year ’ s sharp fall-back within the next year or so , beyond that at best they may plateau for a few years to be followed by a steady decline .
• Depressed refining margins , which are still to recover from last year ’ s decline to / below break-even levels .
2010 2021 Major Oil Companies BP , Esso , Shell , Total BP , Esso , Shell
Mini Majors / Mid Size Refiners
Re-sellers / Wholesalers / Importers
CoocoPhillips , Ineos , Petroplus , Chevron , Murco
GB Oils , Greenergy , Harvets Energy , Mabanaft , Prax Petroleum , World Fuels
Phillips 66 , Petrlneos , Essar , Valero , Prax
Petrolium 1
Certas Energy , Greenergy , Mabanaft , Puma Energy , World Fuels
Note ( 1 ) Total brand and associated imaging is available from Prax Petroleum retail channel , Harvest Energy , to independent dealers .
• Increasingly stringent emissions requirements , the measures introduced to enforce and the associated compliance costs .
Further , net exports account ( 2019 outturns ) for 40 % of refinery petrol productionwith indigenous requirements capable of being covered by 3-4 of the existing facilities . In contrast , net imports of derv and Jet A-1 account ( 2019 out-turns ) for just under 50 % and two thirds respectively of inland consumption .
24 Fuel Oil News | August 2021