Stockholding obligation
The compulsory oil stock of the Netherlands is based on the international calculation methods of the IEA and the EU. The strategic stock enables the Netherlands to contribute to a collective action with OECD countries in the event of an oil crisis. It also provides supply security to domestic oil consumers, such as the industrial and transport sectors.
Purpose
COVA and the oil sector maintain strategic oil stocks. These can be deployed during national or international oil shortages, to prevent major economic damage. Temporary disruptions of oil supplies may occur due to, for instance, political or geopolitical tensions, a natural disaster or war.
The strategic oil stock helps the Netherlands at times of oil shortages to contribute to:
- A collective action with the OECD countries. As an EU Member State and IEA member, the Netherlands may be requested, together with other countries, to put parts of the strategic stock on the market in order to make up the shortages that have arisen.
- Supply security for domestic oil consumers, such as the industrial and transport sectors. The Minister of Climate Policy and Green Growth may issue instructions to deploy (parts of) the stock to make up fuel shortages in the domestic market. This will give domestic consumers the confidence that oil products will remain available to them.
Calculation of compulsory oil stock
The extent of the national strategic oil stock is determined annually by the Minister of Climate Policy and Green Growth. This is done on the basis of calculation methods enshrined in law. The Dutch compulsory oil stock is based on the net import method applied by the IEA and EU and the consumption method applied by the EU. The net import method is the difference between oil imports (in the Netherlands, both crude oil and oil products) and oil exports (in the Netherlands, primarily throughput and manufactured oil products). An exception applies to oil products for marine bunkers (fuels for international maritime shipping) and the chemical industry, of which naphtha.
The Netherlands occupies a special position because of a high consumption of naphtha as a blending component in the gasoline export flows, which caused net import figures to plummet in recent years. This means that since 2019 the Dutch compulsory oil stock has been equal to the lower limit set by the EU, i.e. 61 days of domestic consumption.
The compulsory oil stock of the oil sector is calculated in accordance with their domestic sales and deliveries of aviation fuel which results in approximately 20% of the national obligation. The compulsory oil stock held by COVA equals the difference between the calculated total national stockholding obligation and that of the oil sector. COVA is thus responsible for approximately 80% of the national compulsory oil stock.
The compulsory oil stock is measured in kiloton crude oil equivalent (kt COE), in accordance with EU Directive 2009/119/EC. In 2022, COVA’s compulsory oil stock was raised to 4.1 million ton COE, where it was kept at a constant level of 3.5 million ton COE in previous years. The compulsory oil stock held in 2022 by the Dutch oil companies together was approximately 0.7 million ton COE (0,6 mln ton COE in 2021). At the moment cumulative Dutch compulsory oil stocks equal more than 90 days of consumption (see Eurostat).
*) Due to the Dutch participation in the IEA-led collective action in April and May of 2022, COVA sold about 180 kilotons of diesel from its strategic stock. In the meantime COVA has been instructed by the Minister to replenish its stock to the original levels. COVA is also instructed to temporarily expand its diesel stock with an additional 500 kilotons and to aim for a stockholding obligation of 4,100 kilotons COE, if possible.
The stockholding year has twelve months and starts on July 1st. The stockholding obligation is calculated with data from the reference year, being the calendar year prior to the stockholding year.
International arrangements
The Netherlands has committed itself to international arrangements on strategic oil stocks. IEA members and EU Member States are obliged to maintain a strategic stock equal to 90 days of net imports. In addition, EU Member States must maintain a stock equal to the calculated value of (I) 90 days of net imports or (II) 61 days of domestic consumption, whichever is higher. This lower limit for domestic consumption is intended especially for countries producing large quantities of domestic crude oil. After all, domestic production leads to lower net oil imports, or no net oil imports at all. This might result in an ineffectively low level of strategic stocks. This is why the EU prescribes a lower limit of at least 61 days of domestic consumption.
Oil consumption source: CBS Statline
The EU rules also stipulate that emergency stocks:
- may not be part of commercial stocks;
- must be maintained within the territory of the EU;
- must be maintained for at least one third part in the form of refined product, being a reflection of domestic consumption. For the Netherlands, this means gasoline, diesel and kerosine;
- have a 10% safety margin for so-called tank bottoms or unavailables. This will prevent a situation in which parts of the strategic stock are unavailable due to technical restrictions.
Lower limit of national compulsory oil stock
The Netherlands has a relatively large and complex petrochemical sector compared with the rest of Europe. This complexity causes an incorrect reflection of oil consumption in the IEA calculation (90 days of net imports) for the Netherlands.
In recent years, there has been a sharp decline in the net imports calculated, in particular because of increasing use of naphtha. Based on international arrangements, naphtha is disregarded for the purpose of the IEA and EU calculations. However, naphtha as a blending component of gasoline is taken into account in measuring exports or inland consumption. The Netherlands has one of the largest gasoline blending facilities in the world in the port of Amsterdam, where a.o. large quantities of naphtha are processed into gasoline. The large volume of Dutch gasoline exports, including the naphtha contained therein, results in a low 90 days net import figure. As a result, the Netherlands reached since 2019 the lower limit set by the EU, i.e. 61 days of domestic consumption: for 2023, this equals approximately 2.9 million ton COE (2.8 mln ton COE in 2022).
