Page 21 - Gi March 2019 - Flipbook

n the wake of the Brexit withdrawal The UK may also seek an extension from the EU. However, in the long
deal being unequivocally rejected to the current two-year Brexit period, term, access to EU workers beyond
by Members of Parliament on 15 which would ultimately be followed the transition period may be more
January 2019, there is significant by one of these options. However, this problematic. The UK will not be entitled
I uncertainty for not only the gas can only be granted by the unanimous to revoke the backstop once it is in
sector but for the economy in general. agreement of EU member states. force without the mutual agreement of
While it is not clear what Brexit will the EU. This is a major reason why the
exactly look like on 29 March 2019, there 1. Successfully renegotiating backstop is so contentious and why the
appear to be three potential outcomes: the existing WA with the EU UK government is under pressure to
1. the UK government successfully Since the MPs voted by 432 votes to 202 amend the agreement to remove it.
negotiates amendments to the to reject the Withdrawal Agreement,
existing Withdrawal Agreement (WA) the UK has been under pressure to 2. A no-deal Brexit
with the EU; or seek further concessions from the EU. Without an agreement, the default
2. the UK leaves the EU without a deal However, the European Commission position under Article 50 TEU is that
(a ‘no-deal’ Brexit); or has made it clear that it is not open to the UK will leave the EU and revert
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3. the UK remains in the EU by revoking renegotiation of the WA. The major to World Trade Organisation (WTO)
Article 50. sticking point is the terms of the so- rules. Paul Wheelhouse, Scotland’s
called ‘backstop’ arrangements for Energy Minister, recently stated that
the Irish border. It is unlikely that the “falling back on the WTO would be
WA will be changed dramatically, so it hugely damaging for the economy and
is worth highlighting how its current the oil and gas sector within that.” 2
terms might impact the gas sector. Other commentators have suggested
The WA does not refer to the gas that a no-deal Brexit would lead to gas
sector. However, it does provide shortages and outages. In our view, a
guidance on goods and services and statistical analysis of the UK gas sector,
the free movement of workers, both of as well as an understanding of the UK’s
which are crucial to the gas sector. gas interconnectors with mainland
Under the WA, trading gas between Europe, does not add up to deficiencies
the UK and the EU will continue as for the UK gas sector. However, it is
usual until the end of the transition highly plausible that increased costs
period, which is currently set at 31 could arise as a result of increasing the
December 2020. Until this date, the demand of gas on other non-EU gas
UK will be able to remain in the EU supply chains.
customs union and the single market,
but the UK will not be able to influence Under the WA, trading gas
EU law which relates to the gas sector.
The UK and the EU will need to come between the UK and the EU
to an agreement on their future trade will continue as usual until
relationship by the end of the transition the end of the transition
period, otherwise the Irish backstop period, which is currently set
will be triggered and the UK will be
aligned with EU trade regulations. The at 31 December 2020
result of this will be an administrative
headache for gas companies that trade According to British Gas, whose
with the EU, regardless of whether their sources derive from the Department
goods are shipped between Northern for Business, Energy and Industrial
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Ireland and the Republic of Ireland; the Strategy statistics , 44 per cent of the
only benefit being that the goods that UK’s gas comes from UK production of
are shipped between the UK and the EU gas, nine per cent from LNG tankers,
might not be subject to tariffs. largely from Qatar, and the remaining
Under the WA, EU workers who are 47 per cent comes from Europe, most
working in the UK or those that move significantly from Norway, Russia and
to the UK during the transition period Turkey, all of which are not EU member
will be able to remain in the UK on a states. Therefore, it is likely that the
long-term basis after the transition UK will continue to have a strong gas
period has ended. The government has supply. This is boosted by the fact that
indicated that after this withdrawal Qatar’s Energy Minister has viewed
period, workers will be subject to the Brexit as a good opportunity: “[we] will
same treatment as non-EU workers and always be there to supply the energy
possibly there will be the introduction required. Certainly we can contribute
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of a points-based system, but there to the UK’s need” . Another positive is
may be some preferential treatment the future fracking potential available
for EU workers who need to enter the on the UK mainland, as indicated by the
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UK on a short-term basis. In summary, British Geological Survey . What can
in the short term there are unlikely to be inferred from this analysis is that no
be changes for gas sector employees matter what the outcome of Brexit, the

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