Czech Republic Oil Security Policy

As a landlocked country, the Czech Republic does not have any oil ports, and its refineries are supplied through two major crude oil pipelines from neighbouring countries. Oil security is bolstered by major storage facilities with a total storage capacity of just over 26.4 mb. These are managed by two Czech state-owned enterprises, MERO for crude oil storages and ČEPRO for petroleum product storages.

The public stocks are managed by the Czech central stockholding entity ASMR, but there is no compulsory stockholding obligation on the oil industry. The country holds government stocks, domestic industry stocks, and a few stocks in neighbouring countries, held by Czech industry for logistical purposes. The Czech Republic is compliant with the IEA 90-day stockholding obligation. Nevertheless, the current amount of oil emergency stocks falls short of the minimum level obligated by the domestic Act and EU regulation on emergency stocks. 

Organisation

The Czech Republic’s legal oil emergency framework is primarily governed by two acts. The first one is Act No. 189/1999 Coll. on Emergency Oil Stocks, the main legislation which lays down basic principles, rules and measures for the emergency response policy. The second one is the Act No. 97/1993 Coll. on the competence and role of the ASMR in the oil emergency system. Furthermore, Decree No. 165/2013 Coll. regulates the technical aspects of oil emergency stocks. All these reflect the EU Council Directive 2009/119/EC on imposing an obligation on EU member states to maintain minimum stocks of crude oil and/or petroleum products.

In accordance with Act No. 97/1993 Coll., the ASMR is the central body of the state administration in the areas of economic measures for crisis situations and mobilisation of emergency oil reserves. The ASMR is responsible for oil crisis management in the Czech Republic in accordance with the relevant laws, by protecting supplies of crude oil and petroleum products and developing plans and measures for dealing with oil disruptions. It monitors the total stocks of crude oil and petroleum products in the Czech Republic. Also, as a central stockholding entity, it has a role to replenish, protect, and maintain emergency oil reserves on a regular basis. The Chair of the ASMR is appointed and discharged by the government.

The main planning document for oil emergency is the Standard Plan for major oil supply disruptions. The Plan elaborates the measures set by Act No. 189/1999 Coll. into concrete activities, procedures and organisational measures carried out by the ASMR. These measures are further worked out in individual crises plans of central administrative authorities (ministries), regional authorities and municipalities. The ASMR is responsible for creating and regularly updating the Standard Plan for foreseeable oil disruptions. The feasibility of the Plan is regularly verified (almost every year) during crisis exercises organised by central administrative authorities (ministries) and regional authorities.

The Czech National Emergency Strategy Organisation (NESO) is chaired by the ASMR and consists of representatives of the Czech petroleum industry, representatives of relevant ministries including the Ministry of Industry and Trade (MIT), and representatives of the ASMR. Notably, the ASMR works as the secretariat of NESO and has the leading role in co-ordinating the NESO and maintaining contact with the oil industry and the IEA during an oil emergency. The Czech oil NESO has a primary role to promote coordination at the time of oil emergency situations and to discuss how to address them, mainly through the release of oil emergency stocks and oil demand restraint measures. In normal times, the NESO meets at least once a year, with an option to convene additional meetings at the request of any member.

Other ministries and authorities also play a role in the NESO, including the MIT and the Czech Statistical Office. Notably, the MIT has the role to harmonise the NESO recommendations with the overall Czech oil policy.

Emergency oil stocks

The Czech Republic meets its stockholding obligation to the IEA mainly by holding public stocks managed by the ASMR. All Czech oil emergency stocks are government stocks stored domestically; there is no compulsory stockholding obligation for the Czech oil industry. Emergency stocks may be stored only by a natural/legal person who has a contract with the ASMR. On the basis of such a contract, contractors – mostly state-owned enterprises (SOEs) – provide for storage and manage the oil emergency stocks. In general, MERO stores crude oil, while ČEPRO stores petroleum products. Another contractor is Unipetrol, which stores a small amount of crude oil emergency stocks.

A potential risk for Czech oil security is that operational stocks of the industry are rather low, given that there is no obligation. Under the present legislation, the ASMR is the only entity which is mandated to maintain emergency oil stocks, while oil companies operating on the Czech market choose their own level of operational commercial stocks, usually just a few days of refinery intake. Thus, even with a limited oil supply disruption, refineries have to already ask for the release of ASMR crude oil stocks to avoid shutting down. The last time this happened was in 2019 when Russian crude oil imports to the Czech Republic through the Druzhba pipeline were disrupted due to contamination. The refineries found themselves with operational crude oil stocks sufficient for only about 5 days. Hence, a mix of emergency stocks consisting of industry obligated stocks in addition to public stocks would contribute to more robust emergency preparedness.

The ASMR adopts necessary measures to ensure that oil emergency stocks are available and physically accessible, and conducts regular inspections of emergency stocks to maintain the quality and quantity of them. All emergency stocks are state property administrated by the ASMR.

Stock composition

The Act No. 189/1999 Coll. on emergency stocks and Regulation 165/2013 on sorts of oil emergency stocks lay down the composition of oil emergency stocks. The Czech Republic has been in compliance with the IEA’s minimum obligation since 2004.

The ASMR holds 15.2 mb of domestic government stocks consisting of 49% crude oil and 51% refined products in contractor’s storage facilities. The Czech oil industry holds 8.6 mb of domestic industry stocks consisting of 39% of crude oil and 61% of refined products.

The Czech Republic has bilateral stockholding agreements with Germany and the Slovak Republic, but no stocks were held under these bilateral arrangements as of 2021. Stockholding ticket arrangements are also not used in the Czech Republic. However, the Czech industry does hold a total of 1.5 mb of crude stocks in Germany, Italy and the Slovak Republic for logistical purposes. EU member states can store their oil emergency stocks on the territory of the Czech Republic only with the Czech government approval.

All crude oil stocks kept by the ASMR are of the Russian Export Blend type, despite the fact that the Kralupy refinery runs much more efficient on light sweet crude oil. In order to hold emergency stocks in line with the refinery intake and enhance emergency preparedness, replacement of a part of the Russian export blend stocks with lighter sweet crude oil could be pursued. In terms of product stocks, only the most important fuels are stored: diesel, gasoline and kerosene jet fuel.

As stated above, the Czech Republic has not had any issues with meeting the IEA’s minimum obligation in recent years. Nevertheless, according to the EU methodology of emergency stock calculation (under EU Council Directive 2009/119/EC), which does not count certain commercial stocks, emergency stocks in the country fell short of the minimum level obligated by Act No. 189/1999 Coll. The government has an objective to ensure that stocks remain above 90 days of net imports based on the EU methodology, with the prospect of increasing those stocks to 120 days, and to keep stocks at that level.

Demand restraint measures

Demand restraint measures are another part of the oil emergency policy. These measures can be either soft ones (e.g. carpooling, eco-driving, public transport promotion) or hard ones (e.g. reducing the speed limits for motor vehicles on public roads, limiting commercial air transport, setting up regulatory measures for the use of crude oil and petroleum products for essential suppliers). The soft measures are mostly recommendations by the government, regional authorities and municipalities, via the media, to encourage voluntary actions by companies and citizens. Hard measures, such as rationing, can involve a number of enforcement and monitoring authorities such as police, rail authority and Czech Trade Inspection Authority (CTIA). The implementation processes for demand restraint measures are described in more details in the Standard Plan for major oil disruptions prepared by the ASMR.

The Standard Plan pays special attention to the fuel rationing system, which is one of the hard oil demand restraint measures. The fuel rationing system is based on special fuel cards for allocation of fuels via the network of oil emergency service stations and coupons for all public service stations in the Czech Republic. The ASMR is responsible, in accordance with the Act No. 189/1999 Coll., for preparation and implementation of all measures relating to the fuel rationing system. The network of oil emergency service stations covers stations of Benzina, EuroOil (managed by ČEPRO) and MOL, and consisted of around 900 stations as of 2020.

Releases of industry and public stocks

A key component of the Czech oil emergency response is a stock drawdown, and Act No. 189/1999 Coll. lays down the use of oil emergency stocks. When an emergency response is required, the ASMR chairperson has the mandate to release emergency stocks as long as the stocks do not fall below the level of 90 days of net imports. For larger stock releases, an explicit approval from the government is required. Upon receipt of the proposal by the ASMR, the government has the power to order the release of emergency oil stocks to safeguard the national economy or to participate in the IEA collective actions. The decision-making process by the government is expected to take 48 hours. The entire process, including activation of NESO, proposal of stock release by the Chair of the ASMR, government decision, and necessary administration, takes approximately five days. Another day is expected for the start of the actual stock release.