Insolvency affecting fuel supply
| Impact | 5 |
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| 4 |
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| 3 |
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| 2 |
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| 1 |
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5 |
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| Likelihood | |||||||||||||||||||||||||||||||||||||||||||||||||||
| ID | 15 |
|---|---|
| Risk theme | Accidents and system failures |
Impact & Likelihood
| 5 | Catastrophic |
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| 4 | Significant |
| 3 | Moderate |
| 2 | Limited |
| 1 | Minor |
| 5 | >25% |
|---|---|
| 4 | 5-25% |
| 3 | 1-5% |
| 2 | 0.2-1% |
| 1 | <0.2% |
Background
The insolvency of a downstream oil sector operator could have an impact on regional fuel supply and it will be important in this scenario to ensure that there is a managed transition to the closure of the site, enabling the uninterrupted supply of fuel to customers.
Scenario
The reasonable worst-case scenario for this risk concerns an oil refinery, importation, storage or distribution company suddenly becoming insolvent. This could cause major regional disruption to the production and supply of refined fuels, impacting road transport, aviation and domestic heating fuel. The loss of fuel for heating would impact domestic customers, as well as commercial premises and care homes which are required to maintain consistent temperatures for residents. Impacts would be greatest during winter months.
Variations
A less severe scenario would see an organised closure and sale process, giving the sector time to reorganise fuel supplies either by use of alternative supply points or through adjusting the business model of the asset to make it more viable within the sector.
Response capability requirements
Government has established contingency plans in place to manage this risk, and these are listed in the National Emergency Plan for Fuel, including Operation ESCALIN, a fuel supply contingency measure to make trained military drivers available to support fuel deliveries. The National Emergency Plan for Fuel sets out the government’s approach to maintaining fuel supplies in an emergency. The plan is for use by the government, the downstream oil supply industry, and resilience planners for local services. It includes the possibility of prioritising fuel for the emergency services and rationing fuel to retail customers using legislation under the Energy Act.
Recovery
The government expects that it may take several weeks for industry to readjust supply routes following a sudden closure of a site, but this will begin almost immediately. The government response capability will aim to mitigate the most severe impacts and ensure the readjustment of the sector supply routes happens as quickly as possible.