Experts Call for the Soonest Selection of a Model for Creating Oil Reserves in Ukraine

20 May 2019

Increasing dependence on external supply of petroleum products, primarily from the Customs Union countries, necessitates accelerating the work on the creation of the minimum oil and petroleum products stocks in Ukraine, as provided for by EU Directive 2009/119/EC.

This issue was discussed during the round table “Creation of Oil Reserves: Stop Procrastinating” on 5 April 2019 organized by the coalition of experts “Energy Reforms” within the framework of the “Enhancing Impact of Civil Society in Monitoring and Policy Dialogue on Energy and Related Sectors` Reforms in Line with the Association Agreement implementation” Project.

“There is a need for the soonest resolution of the issue of choosing a model for creating oil reserves and adopting regulatory legal acts governing the framework of forming reserves, the conditions for their storage, unblocking (use) and updating” said Hennadii Riabtsev, an expert.

According to the presented analytical memo “Creation of Oil Reserves: Stop Procrastinating” Ukraine is proposed to create 2 million tons of minimum stocks of oil and petroleum products (in the amount equal to 90 days of average daily net import). Due to small amounts of raw material processing locally and the risks of supply to one operating oil refinery, the minimum stocks may consist of 30% of crude oil (0.7 million tons) and 70% of petroleum products (1.3 million tons). For the purpose of storage, Ukraine is advised to choose automotive petrol and diesel fuel in the ratio of 38:62 (0.49 and 0.81 million tons, respectively). The formation and maintenance of minimum stocks of oil and petroleum products is recommended by increasing the average weighted excise duty rate by USD 24.58 per ton.

According to the experts, the implementation of the requirements envisaged in Directive 2009/119/EC will require the revision, submission and approval of the following regulatory legal acts:

  • resolution of the Cabinet of Ministers of Ukraine on approval of the selected model of minimum oil and petroleum products stocks;
  • Law of Ukraine “On Minimum Oil and Petroleum Products Stocks”;
  • amendments to the Tax Code of Ukraine No. 2755-VI dated 2 December 2010 concerning the target use of the excise tax on sold petroleum products for the formation and maintenance of minimum stocks;
  • amendments to the Law of Ukraine “On Licensing Types of Economic Activity” No. 222-VIII dated 2 March 2015 concerning the inclusion in the list of licensed types of economic activity for maintaining minimum stocks of oil and petroleum products;
  • amendments to the Law of Ukraine “On the State Material Reserve” No. 51/97-VR dated 24 January 1997 and the resolution of the Cabinet of Ministers of Ukraine “On Approval of the Regulation on the State Agency of Reserve of Ukraine” No. 517 dated 8 October 2014 concerning the establishment of liability and duties the State Agency of Reserve in the system of forming and maintaining the minimum stocks of oil and petroleum products;
  • Government’s resolution to approve the regulation on a central company for managing the minimum stocks of oil and petroleum products.

Since the availability of only oil reserves as such does not guarantee the reliable functioning of critical infrastructure, the experts of the coalition “Energy Reforms” advise that Directive 2009/119/EC should be implemented simultaneously with the formation of all types of fuel and energy stocks as well as excessive maneuvering power in the energy sector.

Expert opinions are based on the findings of regular monitoring of Ukraine’s implementation of the Association Agreement with the EU in the areas of energy and environment. The participants of six working groups are responsible for the expert examination and provide the latest information on reforms and related analytical products.

The coalition consists of: DiXi Group Non-Governmental Organization, OPORA all-Ukrainian Non-Governmental Network, Energy Association of Ukraine , Resource & Analysis Center “Society and Environment” and Association “European-Ukrainian Agency”.

The findings of regular monitoring of Ukraine’s implementation of the Association Agreement with the EU in the areas of energy and environment as well as the analytical memo “Creation of Oil Reserves: Stop Procrastinating” can be found on the official website of the coalition “Energy Reforms” (http://enref.org/)

 

Our platforms

Information and analytical website “Ukrainian Energy UA-Energy.org” is unique platform to inform

UA-ENERGY.ORG

Website of the coalition which unites experts from leading think tanks and NGOs in the field of energy and environment

enref.org

National website of Extractive Industries Transparency Initiative in Ukraine

eiti.org.ua

Independent platform for public dialogue on the issues of unconventional gas exploration and production

newgas.org.ua

Open, online discussion platform which provides an opportunity for everyone to offer a constructive, realistic strategy

ENKARTA.ORG