Study on strategic petroleum reserve completed by next year

MANILA, Philippines — A study on the establishment of a strategic petroleum reserve (SPR) in the country is expected to be completed by next year, with state-run Philippine National Oil Co. (PNOC) targeting to onboard a transaction advisor for the project in the fourth quarter.

During an organizational meeting of the Senate Committee on Energy yesterday, PNOC president and CEO Jesus Posadas said the joint Department of Energy and PNOC strategic petroleum reserve committee has approved the terms of reference for the procurement for the engagement of the transaction advisor, which has a budget of P100 million.

“Currently, PNOC is targeting to engage the transaction advisor within the fourth quarter of 2022, and have the feasibility study completed within nine months,” Posadas said.

PNOC will engage the services of a transaction advisor to prepare the detailed feasibility study for the development of a national SPR.

The SPR, or a strategic oil stockpile, is an emergency fuel storage of oil and petroleum products maintained by either the government or private entities or both entities that are released during periods of local or international oil supply disruptions.

“The national strategic petroleum reserve is the development of a permanent strategic oil stockpile to ensure long term stability and security of oil supply in the country, especially in times of severe disruptions in oil supply due to geopolitical events, calamities or emergencies, which the deregulated privatized downstream sectors’ minimum inventory requirement will not be able to address, particularly the continued operation of the government social services, police, and the armed forces,” Posadas said.

“The basic concept is that today, the downstream oil industry is just mandated to hold what is called the minimum inventory requirement which is 30 days for refineries, 15 days for importers, and seven days for LPG. What we’re thinking is over and above what the private sector is mandated as a minimum to hold, government should be in a position to address a severe oil disruption that is over and above what is mandated as a minimum inventory requirement,” he said.

The comprehensive feasibility study to be prepared by the chosen transaction advisor is expected to cover the technical, legal, social, environmental, financial, and economic viability study, as well as the risk assessment of developing and implementing a national SPR.

Should developing a national SPR is determined viable for the country, PNOC said the study must assess potential sites considering all the currently existing storage facilities that can be used for SPR development.

Likewise, the best stockpile ownership options, methods and technologies to be adopted, composition and volume, and estimated total project cost should be determined.

PNOC said also needed to be studied is that if construction of additional refineries and other infrastructure would be necessary, given that the country’s daily refining capacity is long outpaced by its daily domestic oil requirements.

Recognizing that any SPR program would entail gradual build-up of volume and presence in strategic locations, PNOC is also requiring its transaction advisor to come up with a study on the establishment of an interim oil stockpiling program that can be undertaken in the near term as a transition phase leading to the full blown SPR.

The PNOC is the agency legally mandated to carry out the activities on behalf of the government as envisioned in an SPR program.