On 14 September 2009 the European Council approved 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 ("Directive 2009/119/EC") with the aim of ensuring a high level of security of oil supply in the EU through reliable and transparent mechanisms based on solidarity amongst Member States, maintaining minimum stocks of oil and/or oil products and putting in place the necessary procedural means to deal with a serious shortage.

Directive 2009/119/EC had not formally been transposed into the Spanish legal system until the enactment of Royal Decree-Law 15/2013, of 13 December, on the restructuring of Administrador de Infraestrucuras Ferroviarias (ADIF), the public railway infrastructure administrator, and other urgent economic measures ("RDL 15/2013"), published in the official state journal (BOE) on 14 December 2013, entering into force on the following day.

The first final provision of RDL 15/2013 amends certain articles of Act 34/1998, of 7 October, on the Hydrocarbons Sector (the "Hydrocarbons Act"), to adapt its content to the provisions of Directive 2009/119/EC.

This note offers a summary of the main changes to the Hydrocarbons Act as a result of the transposition of Directive 2009/119/EC.

  1. Background and purpose sought

Within the context of implementing an integrated energy policy for the EU, Directive 2009/119/EC sets forth a series of measures necessary to guarantee security in the supply of oil and oil products, together with certain other ancillary procedural rules to calculate and monitor the stocks held by each Member State.

From the perspective of applicable Spanish laws and regulations, the truth is that the Hydrocarbons Act already covered most of the provisions set forth in Directive 2009/119/EC and the Spanish legislator therefore understood that only articles 50 to 52 and 110 of the Hydrocarbons Act required amending to transpose the Directive. Likewise, as Spain is a member of the IEA, Spain already met the aim of Directive 2009/119/EC to align methodologies for calculating stocks with the methods used by IEA. Thus, the Hydrocarbons Act required very few amendments as a result of the Directive.

Nevertheless, the Spanish Government took the opportunity to amend some other aspects of the Hydrocarbons Act to:

  1. establish a conceptual equivalence between "minimum security stocks" and "emergency stocks" (as this term is used in Directive 2009/119/EC), including a minimum level of "emergency stocks";
  2. redefine the function and capacities of "Corporación de Reservas Estratégicas de Productos Petrolíferos" ("CORES"), the Spanish public central stockholding entity, and adjust the procedures for the identifying, verifying, accounting and monitoring stocks as well as communications among agents and the respective authorities in line with the provisions of Directive 2009/119/EC;
  3. include certain requirements and time-bars for operators and companies obliged to maintain minimum security stocks; and
  4. update the rules on penalties regarding the operators' obligation to disclose information to CORES.
  1. Amendments to Article 50: minimum security stocks, emergency stocks and specific stocks

RDL 15/2013 introduces the terms "emergency stocks" and "specific stocks", defined in Directive 2009/119/EC, in connection with article 50 of the Hydrocarbons Act.

Emergency stocks

According to Directive 2009/119/EC, "emergency stocks" are the oil stocks that each Member State is required to maintain to ensure that the total oil stocks maintained at all times within the EU correspond, at the very least, to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever is greater.

RDL 15/2013 establishes that "emergency stocks" are equivalent to "minimum security stocks", which was already defined in the Hydrocarbons Act. In this sense, the new wording of the third paragraph of article 50.1 of the Hydrocarbons Act provides that "minimum security stocks are considered to be emergency stocks for the purposes of ensuring Spain´s compliance with its international undertakings to guarantee the security of supply in the oil market". In accordance with the provisions of Directive 2009/119/EC, it then goes on to state that emergency stocks shall at all times be, at the very least, the greater of 61 days of average daily inland consumption or 90 days of average daily net imports.

In practical terms, this amendment implies that the minimum security stocks/emergency stocks shall range from the above volumes up to a maximum of 120 days of annual sales of the agents under an obligation to maintain minimum security stocks (ceiling that was already established in the Hydrocarbons Act).

Specific stocks

As regards the introduction of the term "specific stocks", Directive 2009/119/EC defines it as the minimum level of oil stocks owned by a Member State or the relevant central stockholding entity and maintained in the territory of the EU, which such Member State may undertake to maintain. "Specific stocks" shall only be composed of one or more of the following product categories: ethane, LPG, motor gasoline, aviation gasoline, gasoline-type jet fuel, kerosene-type jet fuel, other kerosene, gas/diesel oil, fuel oil, white spirit and SBP, lubricants, bitumen, paraffin waxes and petroleum coke.

RDL 15/2013 includes "specific stocks" only to establish that "the Ministry of Industry, Energy and Tourism may establish specific stocks to guarantee security of supply". Thus, RDL 15/2013 merely replicates the entitlement afforded to Member States by Directive 119/2009/EC to legislate on specific stocks; however, no further development is mentioned in respect of that entitlement.

It is worth mentioning that the definition of "strategic stocks" in former article 51 of the Hydrocarbons Act has now been removed. This term seemed to have a very similar meaning to the term "specific stocks" introduced by Directive 2009/119/EC, except for the fact that LPGs were excluded from the accounting of "strategic stocks".

Other amendments

Further to the above, RDL 15/2009 includes in article 50 of the Hydrocarbons Act the Directive's mandate to keep minimum security stocks/emergency stocks available and physically accessible to guarantee the security of supply of the inland market. Both the competent authorities and the central stockholding entity may, at any time, verify whether operators are in compliance with this obligation.

  1. Amendment to Article 51: agents obliged to maintain minimum security stocks

Article 51 of the Hydrocarbons Act has been amended in its entirety. It now deals with certain rights and obligations of the agents obliged to maintain minimum security stocks. Formerly, it was reserved for "strategic stocks", which have been now removed from the law as explained above.

This amendment does not provide for any actual material change to the previous contents of the Hydrocarbons Act, but rather reorders and better organises provisions which were already contained in articles 50 and 52 of the Act. It also covers certain supplemental provisions taken from the Directive, such as: the guarantee of availability of the emergency stocks and specific stocks stored in Spain for the account of another Member State; the mandate to regulate on the setting of procedures to inform the obliged agents about the applicable methods to calculate their stock maintenance obligations; and the stock allocation amongst the central stockholding entity and the obliged agents for each year. The latter two are left for further regulatory development.

Despite not being new to the Hydrocarbons Act, it is worth mentioning article 51.2, which allows agents obliged to hold stocks to store them with central stockholding entities or agents from other Member states with storage capacity abroad (with the prior authorisation of the Ministry of Industry, Energy and Tourism). This is in line with the Directive, which allows for stocks to be held in other Member States, thus making it possible for any Member State to take into account its stocks held in another Member State when calculating its security stocks.

Indeed, this possibility was already foreseen in the Hydrocarbons Act before the enactment of RDL 15/2013, but it has now been redrafted and developed in broader terms. This is important for both agents and CORES because of the unused storage capacity in Spain. On this basis, CORES' potential as a stockholder for foreign entities has been significantly boosted.

Under prevailing Spanish regulations, a bilateral agreement must be signed between Spain and the relevant foreign state to hold minimum security stocks for a Spanish entity outside Spanish territory. For the time being, Spain has entered into bilateral storage agreements with France (2000), Italy (2001), Portugal (2007) and, most recently, with Ireland (2012), Malta (2013) and New Zealand (2013).

However, agents obliged to hold stocks from other Member States and third countries may hold stocks in Spain subject only to the regulations in force in those countries.

  1. Amendment to Article 52: central stockholding entity

The main new feature of this article entails a redrafting of the capacities of CORES as the State's central stockholding entity.

Directive 2009/119/EC sets forth that Member States may set up one central stockholding entity, the purpose of which shall be to acquire, maintain and sell oil stocks in compliance with the stock maintenance obligations, being the only entity entitled to acquire or sell specific stocks. These entities shall be also vested with inspecting capacities and reporting obligations.

The Spanish Hydrocarbons Act already provided for the existence of a central stockholding company, namely CORES. However, now the article that established the parameters for its activity and capacities has been redrafted in line with the provisions of the Directive.

Thus, in addition to the conferred purpose to acquire, set up, maintain and manage the hydrocarbon stocks, other activities (some of which were already managed by CORES) have also been listed. For example: (i) to identify, verify, account for and control the mandatory stocks maintained by the obliged agents; (ii) to publish, on an on-going basis, full information on the stock volumes that it can undertake to maintain for economic operators or other interested central stockholding entities; (iii) to publish the conditions subject to which it is willing to provide services related to maintaining the stocks for economic operators; and (iv) to propose the initiation of disciplinary actions before the competent authority for the breach of mandatory provisions, collecting the necessary information and performing the relevant inspections.

Pursuant to the capacities conferred under article 52 of the Hydrocarbons Act, CORES is also responsible for collecting for the Spanish Ministry of Industry, Energy and Tourism statistical summaries of stocks, which Spain is obliged to submit to the European Commission.

  1. Amendment to Article 110: serious breaches

In accordance with the Directive's mandate to lay down the rules on penalties applicable to infringements of the provisions adopted and taking into consideration the information reporting capacities and obligations now assumed by CORES, article 110 f) of the Hydrocarbons Act adds breach of information reporting obligations as required by the central stockholding entity to the list of serious breaches contained in the Act.

Before this amendment, only breach of information reporting obligations to the Central Administration, the former National Energy Commission (Comisión Nacional de la Energía), the System Technical Manager (Gestor Técnico del Sistema) and to other stockholders constituted serious breaches.

Finally, the reference to the Comisión Nacional de la Energía has been replaced by reference to the Comisión Nacional de los Mercados y la Competencia, which has recently taken its role and duties.