Petroleum Reserves
(Photo credit: Journal of Petroleum Technology)

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 build-up 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 – the lead agency for energy and the agency which to PNOC is attached, has mandated the company through DOE MO 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 PNDC’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 affects 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:

  1. Crude oil and petroleum products importation, storage, and distribution facilities  established within and outside the country (domestic and overseas SPRs);
  2. Partnerships with government agencies and private entities; and
  3. 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.

In light of the failed bidding during the second round of publication for the engagement of a Transaction Advisor for the SPR Project conducted from August 3 to 10, 2021, the terms of reference (TOR) was revisited and revised. A third round of bidding was conducted from October 5 to 12, 2021, however, lone offeror was declared ineligible due to incomplete eligibility documents.

Right after the previous failed round of bidding, PNOC immediately conducted a re-bid (fourth round of posting) from October 19 to 26, 2021. However, the lone offeror was found to be ineligible due to non-compliance to the expertise requirements under the TOR.

On November 9, 2021, PNOC met with the DOE to discuss on the organization of the SPR Review and Evaluation Committee (REC) pursuant to the Department Circular#2021-09-0028. Also discussed was to subject the above said TOR under joint review by PNOC and DOE prior to a possible re-bid and/or pursuing other alternative modes of procurement. The TOR was submitted to DOE on November 19, 2021 for its review. A virtual meeting was conducted between PNOC and DOE on December 9, 2021 aimed at securing favorable endorsement from DOE on the TOR.

Link to the project document: Establishment of PNOC’s Strategic Petroleum Reserve (SPR).pdf