Strategic Petroleum Reserves (SPR) are large stockpiles of crude oil and/or petroleum products, stored in facilities located around the country (and possibly overseas). The buildup and drawdown of inventory, from the specification and volume of products to be stored and required conditions for drawdown, are dependent on the series of legislations, mechanisms, and guidelines that have to be researched and formulated by the implementing agency, and approved by concerned agencies.
In order to undertake a program that will mitigate the vulnerability of the country from the threat of oil supply and price disruptions, the Department of Energy (DOE) – the lead agency for energy and the agency to which PNOC is attached, has mandated the company, through DOE Memorandum Order No. 2019-11-0001, to conduct a feasibility study and accordingly, formulate an implementation plan for the establishment and operation of the National Strategic Petroleum Reserve. This endeavor is aligned to PNOC’s mandate and reason for its creation as a government corporation: to ensure an adequate and stable supply of oil and petroleum products for the country’ s domestic needs.
The establishment of an SPR program is aimed at ensuring the long-term stability and security of oil supply in the country even in times of geopolitical events, calamities or emergencies which induce global oil supply disruptions. Such effects were recently demonstrated in the September 2019 drone attacks in Saudi Aramco’s oil facilities which resulted to about 5% of global oil production cut thereby causing oil prices to go up.
The envisioned SPR shall be a combination of the following:
- Crude oil and petroleum products importation, storage, and distribution facilities established within and outside the country (domestic and overseas SPRs);
- Partnerships with government agencies and private entities; and
- Interconnected pieces of legislation, mechanisms, and guidelines that would guide the project from development to operation.
The National SPR Program is considered to be an extensive undertaking which aims to provide an oil stockpile, either crude oil, finished petroleum products, or both, equivalent to 90 days of the country’s domestic oil requirements. Such magnitude and considerable funding required for an all-encompassing SPR will necessitate the implementation of the program in phases, depending on the resources available.
As of March 31, 2021, PNOC has updated the terms of reference for the engagement of a Transaction Advisor (TA) for the SPR program. The updated terms of reference was approved by the PNOC Board during its meeting held on March 29, 2021. A public bidding will be launched on April 2021 for the engagement of the TA, which among others, shall be tasked to prepare the detailed feasibility study for the project. Moreover, PNOC is in close coordination with the DOE for the preparation of the issuance of a Department Circular on the SPR program. An initial consultation meeting was held on March 05, 2021 to discuss with DOE the comments of PNOC in the draft of said circular.
Link to the project document: Establishment of PNOC’s Strategic Petroleum Reserve (SPR).pdf