As a landlocked country, the Czech Republic does not have any oil ports, and its refineries are supplied through two major crude oil pipelines from neighbouring countries. Oil security is bolstered by major storage facilities with a total storage capacity of just over 26.4 mb. These are managed by two Czech state-owned enterprises, MERO for crude oil storages and ČEPRO for petroleum product storages.
The public stocks are managed by the Czech central stockholding entity ASMR, but there is no compulsory stockholding obligation on the oil industry. The country holds government stocks, domestic industry stocks, and a few stocks in neighbouring countries, held by Czech industry for logistical purposes. The Czech Republic is compliant with the IEA 90-day stockholding obligation. Nevertheless, the current amount of oil emergency stocks falls short of the minimum level obligated by the domestic Act and EU regulation on emergency stocks.
The Czech Republic has two major crude oil pipelines, the 180 kb/d capacity Druzhba pipeline and the 200 kb/d capacity IKL pipeline, both of which are owned, operated and managed by the Czech SOE MERO.
The Czech portion of the Druzhba pipeline, which transports crude oil from Russia, is 473 km long out of an entire length of 3 840 km, and the capacity usable for the Czech Republic is 180 kb/d. Flowing from Slovakia, the Druzhba pipeline enters the Czech Republic in the south eastern part of the country and connects to the Litvínov refinery. The utilisation rate of the Druzhba over the past decade has been about 40-50%.
The Czech portion of the IKL pipeline, which transports crude oil mainly from the Caspian region, is 168 km long (the entire length is 347 km) and its transport capacity usable for the Czech Republic is 200 kb/d. Starting from Vohburg in Germany, the IKL pipeline enters the Czech Republic in the west of the country and ends at the oil depot in Nelahozeves near Prague. The utilisation rate of the IKL in recent years has been about 20-40%. In Vohburg, the IKL pipeline is connected to the TAL pipeline with 868 kb/d capacity, which receives oil via the oil port in Trieste, Italy. The IKL and TAL pipelines provide an important alternative supply route for the country’s oil imports, reducing overall reliance on the Druzhba. Therefore, MERO obtained a 5% share of TAL in 2012, which gives the company the right to use any spare pipeline capacity.
The network of product pipelines in the Czech Republic is exclusively owned and managed by the SOE ČEPRO, which connects the main consumer regions, the oil storages and distribution centres of ČEPRO and refineries in Litvínov, Kralupy, as well as in Bratislava, Slovakia. The 1 100 km network enables direct pumping and supply between its individual nodes and it is fully reversible.
Diversification of oil transport capacity is one of the oil policy priorities of the Czech government and there are two projects underway: increasing the capacity of the TAL pipeline and construction of an oil pipeline connection between the Litvínov refinery and the Spergau (Leuna) refinery in Germany. The Litvínov-Spergau pipeline project is an extension of the Druzhba pipeline to the refinery in Spergau. MERO aims to start operating in early 2025, but active support from the government would accelerate the process.
There are two refineries in the Czech Republic (Kralupy and Litvínov) with a combined capacity of 8.7mt/y (or 175 kb/d). Both refineries were owned by Česká Rafinérská (meaning “the Czech Refining Company”), but in 2005 they were partially sold to the Unipetrol Group, which is 100% owned by PKN Orlen, a Polish oil refiner and petrol retailer. By 2017, the Unipetrol Group acquired additional shares from other private owners of the refineries (i.e. Shell, ConocoPhillips and ENI). The Czech refineries produce a significant proportion of the oil products consumed in the country; more than 80% of petrol consumption and approximately 75% of diesel can be covered by domestic refining.
The Litvínov refinery (capacity 109 kb/d or 5.4 mt/y) processes medium-heavy Russian export blend, which is transported to the Czech Republic via the Druzhba oil pipeline. It is a modernised refinery with a high hydrotreating capacity, operating two oil distillation units and four conversion units. Major products of the Litvínov refinery are motor gasoline, diesel and LPG.
By contrast, the Kralupy refinery (capacity 66 kb/d or 3.3 mt/y) processes light sweet crudes (including Azeri, Kazakh and North African crudes) imported to the Czech Republic via the IKL pipeline, in addition to the crude oil produced domestically and transported from Moravia via the Druzhba pipeline.
It is worth noting that Unipetrol completed the construction of the new polyethylene unit in the Litvínov-Záluží complex in April 2020, one of the most modern production facilities of its kind in Europe.
The Czech Republic has seven main oil storage facilities with a total storage capacity of just over 4.2 mcm (or 26.4 mb). Around half of the country’s storage capacity is for crude oil and the other half for products. The bulk of the storage is held by MERO (crude stocks) and ČEPRO (product stocks), which both provide storage facilities for the public stocks managed by the State Material Reserves Administration of the Czech Republic (ASMR).
MERO operates the Central Oil Tank Farm (CTR), which is used to store strategic emergency oil reserves, short-term intermediate storage of oil transported through the Druzhba and IKL pipelines, and also preparation of different crude oil blends according to customer’s requirements. Over the past few years, MERO has gradually increased its storage capacity at the CTR; in 2020 the CTR storage capacity consisted of 17 above-ground crude storage tanks with a combined capacity of 1.7 mcm.
ČEPRO has 17 product storage sites, consisting of above-ground and underground storage tanks with a combined capacity of 1.8 mcm, along the domestic product pipeline network (which the company also owns and operates).
Oil infrastructure in the Czech Republic, 2022
The Czech Republic’s legal oil emergency framework is primarily governed by two acts. The first one is Act No. 189/1999 Coll. on Emergency Oil Stocks, the main legislation which lays down basic principles, rules and measures for the emergency response policy. The second one is the Act No. 97/1993 Coll. on the competence and role of the ASMR in the oil emergency system. Furthermore, Decree No. 165/2013 Coll. regulates the technical aspects of oil emergency stocks. All these reflect the EU Council Directive 2009/119/EC on imposing an obligation on EU member states to maintain minimum stocks of crude oil and/or petroleum products.
In accordance with Act No. 97/1993 Coll., the ASMR is the central body of the state administration in the areas of economic measures for crisis situations and mobilisation of emergency oil reserves. The ASMR is responsible for oil crisis management in the Czech Republic in accordance with the relevant laws, by protecting supplies of crude oil and petroleum products and developing plans and measures for dealing with oil disruptions. It monitors the total stocks of crude oil and petroleum products in the Czech Republic. Also, as a central stockholding entity, it has a role to replenish, protect, and maintain emergency oil reserves on a regular basis. The Chair of the ASMR is appointed and discharged by the government.
The main planning document for oil emergency is the Standard Plan for major oil supply disruptions. The Plan elaborates the measures set by Act No. 189/1999 Coll. into concrete activities, procedures and organisational measures carried out by the ASMR. These measures are further worked out in individual crises plans of central administrative authorities (ministries), regional authorities and municipalities. The ASMR is responsible for creating and regularly updating the Standard Plan for foreseeable oil disruptions. The feasibility of the Plan is regularly verified (almost every year) during crisis exercises organised by central administrative authorities (ministries) and regional authorities.
The Czech National Emergency Strategy Organisation (NESO) is chaired by the ASMR and consists of representatives of the Czech petroleum industry, representatives of relevant ministries including the Ministry of Industry and Trade (MIT), and representatives of the ASMR. Notably, the ASMR works as the secretariat of NESO and has the leading role in co-ordinating the NESO and maintaining contact with the oil industry and the IEA during an oil emergency. The Czech oil NESO has a primary role to promote coordination at the time of oil emergency situations and to discuss how to address them, mainly through the release of oil emergency stocks and oil demand restraint measures. In normal times, the NESO meets at least once a year, with an option to convene additional meetings at the request of any member.
Other ministries and authorities also play a role in the NESO, including the MIT and the Czech Statistical Office. Notably, the MIT has the role to harmonise the NESO recommendations with the overall Czech oil policy.
Emergency oil stocks
The Czech Republic meets its stockholding obligation to the IEA mainly by holding public stocks managed by the ASMR. All Czech oil emergency stocks are government stocks stored domestically; there is no compulsory stockholding obligation for the Czech oil industry. Emergency stocks may be stored only by a natural/legal person who has a contract with the ASMR. On the basis of such a contract, contractors – mostly state-owned enterprises (SOEs) – provide for storage and manage the oil emergency stocks. In general, MERO stores crude oil, while ČEPRO stores petroleum products. Another contractor is Unipetrol, which stores a small amount of crude oil emergency stocks.
A potential risk for Czech oil security is that operational stocks of the industry are rather low, given that there is no obligation. Under the present legislation, the ASMR is the only entity which is mandated to maintain emergency oil stocks, while oil companies operating on the Czech market choose their own level of operational commercial stocks, usually just a few days of refinery intake. Thus, even with a limited oil supply disruption, refineries have to already ask for the release of ASMR crude oil stocks to avoid shutting down. The last time this happened was in 2019 when Russian crude oil imports to the Czech Republic through the Druzhba pipeline were disrupted due to contamination. The refineries found themselves with operational crude oil stocks sufficient for only about 5 days. Hence, a mix of emergency stocks consisting of industry obligated stocks in addition to public stocks would contribute to more robust emergency preparedness.
The ASMR adopts necessary measures to ensure that oil emergency stocks are available and physically accessible, and conducts regular inspections of emergency stocks to maintain the quality and quantity of them. All emergency stocks are state property administrated by the ASMR.
The Act No. 189/1999 Coll. on emergency stocks and Regulation 165/2013 on sorts of oil emergency stocks lay down the composition of oil emergency stocks. The Czech Republic has been in compliance with the IEA’s minimum obligation since 2004.
The ASMR holds 15.2 mb of domestic government stocks consisting of 49% crude oil and 51% refined products in contractor’s storage facilities. The Czech oil industry holds 8.6 mb of domestic industry stocks consisting of 39% of crude oil and 61% of refined products.
The Czech Republic has bilateral stockholding agreements with Germany and the Slovak Republic, but no stocks were held under these bilateral arrangements as of 2021. Stockholding ticket arrangements are also not used in the Czech Republic. However, the Czech industry does hold a total of 1.5 mb of crude stocks in Germany, Italy and the Slovak Republic for logistical purposes. EU member states can store their oil emergency stocks on the territory of the Czech Republic only with the Czech government approval.
All crude oil stocks kept by the ASMR are of the Russian Export Blend type, despite the fact that the Kralupy refinery runs much more efficient on light sweet crude oil. In order to hold emergency stocks in line with the refinery intake and enhance emergency preparedness, replacement of a part of the Russian export blend stocks with lighter sweet crude oil could be pursued. In terms of product stocks, only the most important fuels are stored: diesel, gasoline and kerosene jet fuel.
As stated above, the Czech Republic has not had any issues with meeting the IEA’s minimum obligation in recent years. Nevertheless, according to the EU methodology of emergency stock calculation (under EU Council Directive 2009/119/EC), which does not count certain commercial stocks, emergency stocks in the country fell short of the minimum level obligated by Act No. 189/1999 Coll. The government has an objective to ensure that stocks remain above 90 days of net imports based on the EU methodology, with the prospect of increasing those stocks to 120 days, and to keep stocks at that level.
Demand restraint measures
Demand restraint measures are another part of the oil emergency policy. These measures can be either soft ones (e.g. carpooling, eco-driving, public transport promotion) or hard ones (e.g. reducing the speed limits for motor vehicles on public roads, limiting commercial air transport, setting up regulatory measures for the use of crude oil and petroleum products for essential suppliers). The soft measures are mostly recommendations by the government, regional authorities and municipalities, via the media, to encourage voluntary actions by companies and citizens. Hard measures, such as rationing, can involve a number of enforcement and monitoring authorities such as police, rail authority and Czech Trade Inspection Authority (CTIA). The implementation processes for demand restraint measures are described in more details in the Standard Plan for major oil disruptions prepared by the ASMR.
The Standard Plan pays special attention to the fuel rationing system, which is one of the hard oil demand restraint measures. The fuel rationing system is based on special fuel cards for allocation of fuels via the network of oil emergency service stations and coupons for all public service stations in the Czech Republic. The ASMR is responsible, in accordance with the Act No. 189/1999 Coll., for preparation and implementation of all measures relating to the fuel rationing system. The network of oil emergency service stations covers stations of Benzina, EuroOil (managed by ČEPRO) and MOL, and consisted of around 900 stations as of 2020.
Releases of industry and public stocks
A key component of the Czech oil emergency response is a stock drawdown, and Act No. 189/1999 Coll. lays down the use of oil emergency stocks. When an emergency response is required, the ASMR chairperson has the mandate to release emergency stocks as long as the stocks do not fall below the level of 90 days of net imports. For larger stock releases, an explicit approval from the government is required. Upon receipt of the proposal by the ASMR, the government has the power to order the release of emergency oil stocks to safeguard the national economy or to participate in the IEA collective actions. The decision-making process by the government is expected to take 48 hours. The entire process, including activation of NESO, proposal of stock release by the Chair of the ASMR, government decision, and necessary administration, takes approximately five days. Another day is expected for the start of the actual stock release.