Spain Oil Security Policy

Organisation

The two most important pieces of legislation are Law 34/1998 on the Hydrocarbons Sector (HCS) and Royal Decree 1716/2004, which regulates the obligation to maintain minimum security stocks, the diversification of natural gas supplies, as stated legally under the Corporation of Strategic Reserves of Oil Products (as amended by the Royal Decree 984/2015) . They provide the Spanish government with powers to guarantee that oil stocks in the country are sufficient to meet the IEA and European Union (EU) requirements and that it can draw stocks in case of a domestic or international emergency.

Within the Ministry for the Ecological Transition and the Demographic Challenge (the Ministry), the Directorate General for Energy Policy and Mines is ultimately responsible for managing oil security of the country.

In December 2013, the Corporation of Strategic Reserves of Petroleum Products (CORES) was appointed Central Stockholding Entity. The agency’s foremost activity is to set, maintain and manage strategic stocks of crude oil and oil products. CORES is a non-profit public corporation under the aegis of the Ministry. It is a separate legal entity, operating under private law. All wholesale petroleum products, liquefied petroleum gas (LPG) operators and gas shippers, obligatorily and automatically become members of CORES so they are obliged to hold minimum security stocks and financially support CORES’ activities by monthly or annual contributions based on their sales or consumption. In addition, other entities like retail distributors, major consumers of petroleum products and LPG, and direct consumers in the natural gas market are obliged to maintain minimum stocks and pay fees for the product volumes not acquired from a wholesale operator or natural gas shipper.

CORES is also responsible for crisis data collection of the hydrocarbons sector in Spain, providing comprehensive data and analysis to the government, market stakeholders and international institutions, including the IEA and Eurostat. The agency’s digital data platform, InfoCores, is accessible by all market participants and allows for gathering and processing of market data immediately, notably in the case of a supply crisis. The obligation to provide information to CORES by different entities is part of the legal obligation to maintain security stocks. As such, providing information has the same legal importance as maintaining security stocks and additionally the inspection and controlling of data quality and deadlines is a core CORES function. Failure to report or provide inaccurate information may be considered a serious offence under Spanish law, subject to sturdy penalties, including withdrawal of the licence to operate.

In an oil supply disruption, the primary response would be to release emergency oil stocks owned by the industry. Releasing strategic reserves owned by CORES (be it through loan, relocation or sale) would be a secondary measure that would depend on the severity of a situation. In case of an oil supply disruption, the Directorate General for Energy Policy and Mines, together with CORES, play a major role by providing technical support between the administration and industry to smoothly coordinate emergency stocks releases.

The HCS also provides the statutory authority for the use of short-term measures to reduce oil demand in a crisis. Article 39 of Royal Decree 1716/2004 establishes that the Minister for the Ecological Transition and Demographic Challenge, at the proposal of CORES, may develop general rules or plans to be implemented in the case of disrupted supply. Within the framework of these prerogatives, Spain has elaborated two strategic manuals of actions: the Contingency Plan for a Situation of Oil Market Crisis, and the Demand Restriction Measures Plan against Oil Market Crisis.

The Spanish NESO is part of the country’s general emergency structure: the National Security System. According to the National Energy Security Strategy of 2015 (document was last updated and enhanced in 2017), the NESO reports to the National Security Council of Spain, which is the highest decision-making body of the National Security System and the principal advisory body used by the Prime Minister for considerations of national security and foreign policy issues. Oil emergencies fall into the category of national security matters according to these provisions. As of 1 December 2017, the National Security Council of Spain was extended by a dedicated Energy Security Committee, chaired by a Secretary of State for Energy. According to the decision of the National Security Council on creating the Committee, it is obliged to hold at least one meeting every two months and additionally whenever necessary for emergency reasons, to sustain operability of the body and improve emergency preparedness of the system.  

The Spanish government would decide on the drawdown of emergency oil stocks, based on a proposal of the National Security Council – Energy Security Committee and CORES. In day-to-day practice during the emergency, the Directorate General for Energy Policy and Mines of the Ministry for the Ecological Transition and the Demographic Challenge, would be in constant contact with CORES on the actual market situation, provide analysis and propose measures. They would report to the Chair of the Energy Security Committee on the developments and ultimately to the Council of Ministers for final decisions.

In case of disruptions, the Operational Handbook serves as a step-by-step manual to help guide the decision-making process. It comprises procedures, draft decisions, contact details and specificities of the stockholding system necessary to provide decision-makers with sufficient knowledge and administrative measures related to the process.

Emergency oil stockholding regime

The HCS sets a maximum level of emergency stocks of 120 days of annual imports or consumption of crude oil and/or oil products. The Royal Decree also specifies the minimum level of oil stocks at 92 days of sales or consumption in the previous year. In addition, companies active in the LPG sector are obliged to store 20 days of stocks of this fuel.

The minimum obligation of 92 days is split between CORES, which is responsible for maintaining strategic stocks to the tune of 42 days, and industry, which has an obligation of 50 days. Industry maintains the so-called minimum security stocks and CORES oversees the strategic (public) stocks. The industry can request CORES to maintain additional days up to 100% of a given company’s obligation in exchange for a fee and according to storage availability. CORES does not maintain stocks of LPG and the full obligation in this regard lies with the industry. CORES is also responsible for monitoring compliance with the minimum stock levels of industry, both for oil, LPG and natural gas.

CORES owns 7.3 million m³ of oil strategic stocks, which are held in the form of diesel oil (54%), crude oil (31%), gasoline (8%), and the remainder in kerosene and fuel oil, reflecting the country’s consumption. Strategic stocks are distributed in five areas based on the consumption needs of each region: 50% of stocks are held in the eastern region, 17% in central region, 15% in northern and 14% in southern regions of the country. Almost 95% of CORES’ stocks are held mostly within the oil and logistic operators’ facilities, whether separated or commingled, according to storage agreements, as well as in its own facilities of Puertollano and Cartagena refineries.

The industry-obligated stocks are composed of middle distillates (42%), crude oil (25%), gasoline (10%), fuel oil (9%) and other legally permitted oil products. Industry’s stocks may be held outside of Spanish territory up to a level of 40% of a given company’s obligation, but not exceeding 15% of total stocks of the country. Holding stocks abroad is allowed only in countries with which the government has concluded agreements. Most industry stocks are held within the national territory.

Emergency oil stocks

The minimum obligation of 92 days is split between CORES, which is responsible for maintaining strategic stocks to the tune of 42 days, and industry, which has an obligation of 50 days.

Other fuels used for the same purposes (biofuels, for example) are understood to be included in the above groups so they equally count towards stockholding obligations. Holding stocks in the form of crude oil is also permitted: up to 40% of the obligation for the gasoline and middle distillate groups and up to 50% for the fuel oil group. To do this, the companies must have a raw material-to-product transformation coefficient approved by the Ministry for the Ecological Transition and the Demographic Challenge.

At the end of 2019, CORES owned 7.3 million cubic metres of strategic oil stocks, which broke down into diesel oil (54%), crude oil (31%), gasoline (8%), and the remainder in kerosene and fuel oil, reflecting the country’s consumption. The vast majority of CORES’ strategic stocks are held within the oil and logistic operators’ facilities, whether separated or commingled, upon commercial storage agreements (53.6% in the storages of logistic service providers, 41% in tanks at refineries), while 5.4% in its own facilities at Puertollano and Cartagena refineries. At the end of 2019, Spain was also home for over 800 thousand m³ of foreign stocks held under bilateral agreements on behalf of other countries, of which 61% belonged to Italy, 13% to Portugal, 11% to Ireland, 6% to New Zealand, 6% to Australia, and 3% to France. 

Oil demand restraint measures

While the release of industry-held emergency oil stocks is Spain’s primary response to a supply disruption, short-term measures to reduce oil demand could also be implemented in a crisis. With the approved 2015 “Demand Restriction Measures Plan against Oil Market Crisis”, the plan outlines measures to restrict oil consumption, such as limits to the usage of vehicles, more efficient driving modes, prioritising the use of infrastructures etc.