Skip to main content

What if it Goes Wrong in Libya ... The Role of the International Energy Agency in Case of Supply Disruption


Faced to the political instabilities in Libya, the International Energy Agency (IEA) expresses itslef today as ready to make available to the market necessary volumes of oil in case of major disruption of supply at the condition that 'alternative suppliers cannot readily be made available via normal market mechanisms', which is not the case as of 22 February (see note IEA).

It is timely to review the role of the IEA and the related international mechanisms in situation of major supply disruption, the so-called Response System.

The 28 IEA member parties have committed themselves in the Agreement on an International Energy Program (I.E.P. Agreement, Chapters I-IV) to take joint measures in case of oil supply emergencies. The I.E.P. Agreement has among these objectives to maintain and improve systems for coping with oil supply disruptions. In case of oil supply disruption, the following procedure will apply to the IEA:

  • The IEA Directorate of Energy Markets and Security assessed the market impact and the potential need for an IEA co-ordinated response;
  • The market assessment includes an estimate of the additional production oil producers can bring to the market quickly, based on consultation with producer governments;
  • Based on this assessment, the IEA Executive Director consults with and advises the IEA Government Board (GB), which is comprised of senior energy officials from member countries who determine the major policy decisions of the IEA. This consultation process to determine the need for a IEA co-ordinated action can be accomplished within 24 hours, if necessary;
  • Once a co-ordinated action has been agreed upon, each member country participates by making oil available to the market, according to natioanl circumstances. An individual member country's share of the total response is generally proportionate to its share of the IEA member countries' total consumption;
  • Throughout this decision-making process and the implementation stage of a decision, industry experts, through the IEA Industry Advisory Board, provide advice and consultation on oil supply/demand and emergency response issues. (Source: IEA)

Then, IEA countries have different options in terms of response measures in order to meet emergency co-ordinated action (i.e. reach their part of the additional oil to be made available to the market), focused on either:

  • increase in supply: stockdraw or production surge;
  • reduce in demand: demand restraint or fuel switching.
Internal permanent measures at the IEA level as regards supply disruptions include: market monitoring; the emergency response reviews of the IEA countries on a regular basis; emergency response exercises, conducted every two years; IEA emergency stock levels, where IEA countries must maintain oil reserves up to a minimum of 90 days of net imports (information is made public).

Previous major oil supply disruptions include: Suez Crisis (Nov. 1956-March 1957); Six Day War (June-August 1967); Arab-Israeli war and Arab oil embargo (Oct.1973-March 1974); Iranian revolution (Nov. 1978-April 1979); Outbreak of Iran-Irak war (Oct. 1980-Jan. 1981); Iraqi invasion of Kuwait (Aug. 1990-Jan. 1991); Iraqi oil export suspension (June-July 2001); Venezuelan strike (Dec. 2002-March 2003); war in Iraq (March-Dec. 2003); Hurricanes Katrina/Rita (September 2005). (Data: IEA). The IEA intervened twice, during the 1991 Gulf War and the 2005 hurricanes.

The question of response in case of supply disruption is raised because of Libya's position in the oil and gas production industry. As reported by the IEA, Libya is a net-exporter of crude oil (crude and natural gas liquids): 85% of its exports go to Europe (Ireland, Italy, Austria, Switzerland, France top the imports; it exported 1.2 mb/d of crude oil to the IEA countries; Libyan exports count for 3% of the total Chinese crude imports. Libya exports natural gas by pipeline to Italy (Green Stream) (represents 13% of Italian gas imports) and to Spain in the form of LNG (1.5% of total Spanish gas imports). (Picture: Natural Gas export routes, IEA).

The EU has developed its own mechanisms in terms of supply disruption, in consistency with the IEA mechanisms: the strategic oil stocks. Council Directive 2009/119/EC of 14 September 2009 imposing an obligation on Member States to maintain minimum stocks of crude oil and/or petroleum products. This Directive will repeal Directive 2006/67/EC of 24 July 2006 on the same subject as of 31 December 2012, in order to put it in line with IEA mechanisms and update requirements. Both directives require Member States to establish and maintain a minimum reserve of petroleum products providing the EU with sufficient security of supply of petroleum resources (equal to at least 90 days of average daily internal consumption based on the previous calendar year).
References:

Picture: IEA.

Libellés :

Comments

Post a Comment