Committee Reports > List of Committees > Joint > 1978 > Committee on the Secondary Legislation of the European Communities > Report No. 15 - Maintenance of Minimum Stocks of Crude Oil and / or Petroleum Products

REPORT

Introduction

1. The Joint Committee has considered the Commission proposal for a Council Directive amending Council Directive 68/414/EEC (as modified by Council Directive 72/425/EEC of 19th December, 1977) of 20th December, 1968 imposing an obligation on Member States of the European Economic Community to maintain minimum stocks of crude oil and / or petroleum products [R/20/78 (ENER 2)]. Council Directives 68/414 EEC and 72/425/EEC and Irish Regulations implementing them were reported on in the fourth and fortieth reports of the previous Joint Committee.

2. Under Directive 68/414/EEC, as amended by Council Directive 72/425/EEC, Member States are obliged to maintain reserve stocks of crude oil and/or petroleum products amounting to at least 90 times their average daily internal consumption in the preceding calendar year. Council Directive 68/414/EEC provides for an exemption of up to 15% from this stocking obligation as regards derivatives of indigenous crude oil consumed by the producer Member State.

3. In Ireland the European Communities (Minimum Stocks of Petroleum Oils) Regulations, 1974 to 1977 which implement Directives 68/414/EEC and 72/425/EEC provide that the statutory minimum amount of oil stocks to be held by oil importers either at home or abroad shall be at a level corresponding to at least 80 days average daily internal consumption in the preceding calendar year. As a contingency stock equivalent to 10 days supply is held at Whiddy Island, the total stock in hands at all times is therefore equivalent to at least 90 days supply.

Commission’s Proposal

4. Until now there has been no call to revise the exemption limit of 15% because of the relatively small amounts of crude oil produced within the Community. However, the United Kingdom have now exceeded the 15% barrier and with increased exploration activity, there is the possibility of other Member States being able to satisfy a significant proportion of national oil demand from indigenous production. This has led the Commission to propose a modification to the 1968 Directive. Under the proposed Directive the exemption limit would be increased from 15 to a maximum of 40%. Moreover, the proposed 40% exemption would apply not only in those Membre States with indigenous oil production, as was the position in regard to the 15% exemption, but also in Member States which consume derivatives of crude oil produced in other Member States. The Commission maintains that a deduction from the obligation to maintain stocks is justifiable in the case of indigenous crude oil especially as it would encourage increased production.

5. The proposed Directive further provides that, in the event of supply diffculties, a Member State will maintain its deliveries of crude oil, and derivatives, to another Member State at the same level as the average quarterly level of the previous year or at a level to be decided by the Community.

Implications for Ireland

6. If the proposed exemption is adopted, the effect on Ireland’s obligation to hold stocks would depend on the extent to which we consume crude oil (or its derivatives) produced either in our own territory or in another Member State. The maximum exemption could result in the 90 days reserve obligation being reduced to 54 days. The proposal in regard to the maintenance of exports to other Member States in the event of supply difficulties would have no implications for Ireland unless and until we find oil in our territory. As regards imports, it could mean that, if we were to import, say, North Sea crude oil (or its derivatives) from the United Kingdom, we would have a guarantee of continued supply, at least to some extent, in a time of supply difficulty.

Joint Committee’s Views

7. The Joint Committee believes that it is in the national interest as well as in the interest of the Community as a whole that adequate stocks of petroleum oils should be maintained to meet any emergency that may arise. The reduction in the obligatory stocks proposed by the Commission depends entirely on the producer states being willing to maintain supplies in the event of supply difficulties. The Joint Committee believes that if adequate guarantees are forthcoming on this score the proposed Directive could be accepted.

8. The cost of holding obligatory stocks falls at present on the oil companies and large oil consumers. A reduction in the stocks held should lead to a reduction in costs. If, therefore, the proposed Directive is adopted, the Joint Committee would expect steps to be taken to ensure that the benefit of the reduction in costs is passed on to the consumer.

9. In the course of its consultations with the oil companies a number of points of detail arose on which the Joint Committee wishes to comment as follows:—

(a)It was suggested that exports of indigenous oil which are at present going outside the EEC could be curtailed in an emergency and that this should be taken into account in fixing minimum stocks. The Joint Committee considers that this point could be taken up if Ireland should become a producer.

(b)It was also suggested that the proposed Directive should deal with how the offset in respect of indigenous oil allowed to a Member State should be apportioned between those obliged to hold the stocks within the State. In the Joint Committee’s view this is a matter which should be left to be regulated by national legislation so that it would be open to the oil companies and large consumers in this country to pursue the matter with the Minister for Industry, Commerce and Energy.

(c)One oil company, which purchases products from its affiliated company in the United Kingdom that are partially derived from refining North Sea crudes, thought that the Commission should produce a formula to deal with its situation. The Joint Committee believes that this too is a matter within the competence of national legislation which could be pursued with the Minister.

Acknowledgements

10. The Joint Committee wishes to record its thanks for the considerable assistance it received from BP Ireland Limited, Conoco (Ireland) Limited, Esso Teoranta, Irish Shell Limited, McMullan Bros, and Texaco (Ireland) Limited in its examination of the proposed Directive.

(Signed) EOIN RYAN,

Vice-Chairman of the Joint Committee.

28th June, 1978.