As part of its long-term strategy for the downstream oil industry, the Aquino administration is integrating into its Energy Reform Agenda the propounded stockpiling program to underpin energy security for the country.

That will supplement its proposed leaning into attracting more refinery investments so the domestic oil market can better shield itself from extreme volatilities in global prices as well as on supply disruptions. However, incentivizing investments for refinery remains a big hurdle.

The idea of putting up a stockpile facility has been cast by the Department of Energy (DoE) on blueprint a decade back, but since nothing really progressed in the past years, it is something that the new administration has been eyeing to rekindle as a policy.

The energy department in the past years has gone as far as seeking the help of other countries in completing a feasibility study for the proposed oil stockpile program.

But bringing that into fruition had turned out patchy due to a number of things that needed to be resolved first – such as: On whose responsibility will investment be latched onto, private or government; and what policy shall be instituted in oil drawdown.

On the siting aspect, Subic was initially proposed but concerns have been raised because the facility being eyed is under a long-term lease arrangement with a private party.

The energy department tapped its United States counterpart for the initial stockpiling study; and the outcome prescribed modes on how the project can be financed as well as the reasonable volume that must be held at the stockpile.

To be viable, it was proposed that the stockpile should at least be around 30 million barrels (MMB); or at least equal to 90-day supply which is consistent with the prescribed level by the International Energy Agency.

Of the proposed volume for strategic reserve, crude was specified to be around 23.5 million barrels; diesel should be around 5.0 million barrels and liquefied petroleum gas (LPG) by 1.5 million barrels.

It further justified that such reserve build-up is warranted because crude oil is cheaper to acquire, store and transport; and has no shelf life compared to refined  products.

In terms of the use of the product stockpile, it was proposed that a “ticket;” or a “delegation contract” between the government and an oil supplier has to be drawn up; wherein the supplier is compensated to store the products, but shall be prescribed that the government can purchase the stocks at any given time upon request.