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Spain's legislation on oil security

Part of Oil Security Toolkit

Spain’s response to oil supply disruptions is primarily governed by the provisions of the consolidated version of the 1998 Law 34/1998 of October 7 of the Hydrocarbons Sector (HCS) as amended by the 2015 Law 8/2015 of May 21. While the HCS provides the legal framework for Spain’s response to oil emergencies, the detailed regulations of the Spanish response to oil supply shortages are provided by the consolidated version of the 2004 Royal Decree 1716/2004 regulating the Obligation to Maintain Minimum Security Stocks, Natural Gas Supply Diversification and the Strategic Petroleum Product Reserves Corporation (OMM) as amended by the 2007 Royal Decree 1766/2007 regulating the Obligation to Maintain Minimum Security Stocks, the Diversification of the Natural Gas Supply and Strategic Reserves of Petroleum Products Corporation and by the 2015 Royal Decree 984/2015 regulating the Organized Gas Market and the Access of Third Parties to the Installations of the Natural Gas System. 


According to article 39(1) OMM, the Spanish emergency response system is triggered by oil supply disruptions or by an effective international decision to release oil stocks. Article 1bis(4) OMM defines an oil supply disruption as being present when there is a sudden drop in the supply of crude oil or petroleum products affecting Spain or an European Union (EU) Member State. Article 1bis(3) OMM defines an effective international decision as a decision by the International Energy Agency (IEA) to release oil stocks.


Whether or not the circumstances which trigger the Spanish emergency response system exist, is determined by the Spanish Council of Ministers (article 39(1) OMM).


General

According to article 50(1) HCS all entities distributing or developing petroleum products are compelled to maintain emergency oil stocks at a level established by the Spanish Government in accordance with Spain’s international obligations. Further specifying the provisions of the HCS, the OMM provides that the primary addressees of Spain’s stockholding obligation are: wholesale oil product operators (article 7(A) OMM), retailers and distributers of oil products (article 7(B) OMM), consumers of petroleum products who are supplied by wholesale oil product traders (article 7(C) OMM). 

Storage Agency

Spain’s Central Stockholding Entity (CSE) is CORES (Corporación de Reservas Estratégicas de Productos Petrolíferos) (see, generally, Title II of OMM). On the one hand, CORES supervises industry reserves. On the other hand, CORES manages and maintains the country’s strategic stocks. Specifically, CORES identifies, verifies and controls the emergency stocks held by the addressees of the stockholding obligation (article 52(3)(a) HCS). CORES is also tasked with compiling an inventory of all emergency stocks (including their location and composition) and to make this inventory available to the Spanish Ministry for the Ecological Transition (article 52(3)(b) HCS). Moreover, CORES is authorised to acquire and to sell emergency stocks (including specific stocks) (article 52(3)(d) HCS). CORES can also propose to the Ministry for the Ecological Transition the taking of measures aimed at implementing and updating Spain’s obligations with respect to oil emergency stocks (article 52(3)(g) HCS) and CORES should in principle cooperate closely with all relevant public authorities to safeguard Spain’s emergency preparedness. The activities of CORES are funded by contributions from the addressees of the stockholding obligation (articles 52(7-8) HCS, articles 26-27 OMM).

Storage Quantity

According to article 50(1) HCS, wholesale operators, retail distribution companies (for the part not supplied by wholesale operators, or other retail distribution) and consumers (for the part not supplied by wholesale operators or retail companies) may be ordered to stock emergency stocks up to a level corresponding to 120 days of their annual imports. Going beyond the provisions of the HCS, article 2(1) OMM further stipulates that the level of minimum oil stocks should correspond at least to the quantity of 92 days of sales or consumption in the previous year. Spanish emergency stocks may be maintained in the form of crude oil, refined or semi-refined products (article 9(2) OMM).

Within this minimum oil stocks, the industry must maintain a quantity of stocks equivalent to 50 days of sales or consumption in the previous year. The remaining 42 days (strategic stocks) are held by CORES directly. Under certain conditions (ES), the obligated entities can ask CORES to hold up to 100% of their obligation. The obliged entity must make a request in number of days of obligation, for the different groups of products, under the terms and conditions established in the approved procedures.

Availability of stocks

According to article 50(3) HCS emergency stocks must be stored in such a manner that they are physically available and accessible at all times. Article 10(4) OMM further specifies that emergency stocks should be stored in such a manner that the continuous supply of oil can be safeguarded for at least 92 days. Additionally, emergency stocks must be physically accessible at all times which the OMM defines as: the storage of petroleum products in a manner that ensures the effective distribution and delivery of such products to users and markets to alleviate any supply disruptions which may have arisen (article 1bis(5) OMM).

Storage Locations

The Spanish HCS does not specify particular storage locations. However, the HCS allows addressees of the stockholding obligation to store emergency stocks in territories of EU Member States provided that the availability of emergency stocks is at all times guaranteed (article 51(3) HCS, see also article 11 OMM) and that prior bilateral intergovernmental agreement with an interested country was concluded. The OMM further specifies, however, that CORES should ensure that emergency stocks held by the Agency are stored in such locations so as to ensure that stocks can reach the centres of consumption continuously for a period of at least 30 days (article 33(1) OMM).

Sale of excess stocks

Article 36 OMM authorises the CORES to sell stocks held in excess of Spain’s stockholding obligation. If the sale price is lower than the acquisition cost, an authorisation by the Ministry is required.


General

The HCS provides the Spanish Council of Ministers with wide ranging powers to address an oil supply emergency that range from the release of emergency stocks and demand restraint measures to production surges and that may also include ‘Any other measures that may be recommended by the international organizations to which the Kingdom of Spain is a party, to be determined in application of those agreements in which it is involved or those that has signed in which similar measures are contemplated.’ (article 49(2)(j) HCS).

Stockdraw

Sale/Tender

Article 49(2) HCS authorises the Spanish Council of Ministers to decree the release of emergency stocks. Further, article 39(1) OMM authorises the Spanish Council of Ministers to release emergency stocks so that they may be used in the most optimal manner at times of emergency. 

Production Surge

According to article 49(2)(h) HCS owners of oil exploration/production concessions may be ordered by the Spanish Council of Ministers to furnish petroleum products which are in short supply.

Demand restraint

Article 49(2) HCS provides that the Spanish Council of Ministers may order the taking of various demand restraint measures including the limitation of maximums speeds on public roads (article 49(2)(a) HCS), restricting the movement of particular types of vehicles (article 49(2)(b) HCS), limiting the movement of ships and aircraft (article 49(2(c) HCS), limiting opening hours of entities distributing petroleum products (article 49(2)(d) HCS), and limiting, allocating or restricting supply of petroleum products to consumers (article 49(2)(g) HCS).   

Fuel Switching

N/A

Relaxations of Road Traffic and Transport Laws

N/A 


The Spanish emergency regime is monitored and enforced on the domestic, regional and international level. Each will be considered in turn.

Domestic

Reporting duties

Article 50(5) HCS provides that the Spanish Ministry for the Ecological Transition and the Demographic Challenge or Autonomous Communities are tasked with ensuring that entities subject to a stockholding obligation comply with their obligation (see also 4(A) OMM). Further, CORES, the Spanish CSE, must submit annually, by 31 January each year,  to the Ministry for the Ecological Transition an inventory of all emergency stocks (including their location and composition) before 31 January (article 52(3)(b) HCS). To safeguard Spain’s emergency preparedness, CORES is further authorised to recommend to the competent authorities the taking of disciplinary measures with respect to entities that fail to comply with their stockholding obligations and CORES is entitled to conduct inspections to this effect (article 52(4) HCS, articles 37-38 OMM).

The addressees of the Spanish stockholding obligation are in turn obliged to submit regular reports to the Ministry for the Ecological Transition and the Demographic Challenge, to the National Commission of Markets and Competition (CNMC) and CORES detailing the quantity and composition of emergency stocks currently held (article 5(1-2) OMM).

Enforcement

Articles 108-114 HCS provide for various sanctions and penalties for violations of obligations deriving from the HCS (see also article 6(1) OMM). Specifically, article 109(1)(m) HCS identifies the failure to comply with stockholding obligations where they involve a severe alteration of the minimum stocks scheme as a ‘very serious offense’ (see also article 110(j) HCS). Depending on the seriousness of a given violation, the HCS provides for financial penalties ranging from a maximum of 30 000 000 EUR for ‘very serious offenses’ to fines of up to 600 000 EUR for ‘minor offenses’ (article 113(1)(a-c) HCS). Additionally, the Spanish Ministry for the Ecological Transition and the Demographic Challenge may impose periodic penalty payments for as long as a given violation is ongoing. These penalty payments may be imposed at a daily rate and may range from 100 to 10 000 EUR (article 114 HCS).


Regional

European Union

As a Member State of the European Union, Council Directive 2009/119/EC obliges Spain to maintain a minimum volume of emergency oil stocks corresponding to 90 days of average daily net imports or 61 days of average daily inland consumption, whichever of the two quantities is greater. The Directive also imposes strict requirements concerning the composition and location of the emergency oil stocks, so as to guarantee their availability and accessibility in case of need, among other provisions.

Spain’s compliance with the provisions of the directive is monitored and enforced by the European Commission. If a Member State is deemed not to be compliant with the EU Directive, the Commission might decide to initiate an infringement procedure, which might ultimately lead to refer the case to the Court of Justice of the European Union (articles 258-259, Treaty on the Functioning of the European Union).

International

The IEA

As a Member of the IEA, Spain is obliged, pursuant to article 2 of the International Energy Programme (IEP), to maintain oil reserves equal to 90 days of net imports of the previous year. IEA members are obliged to submit information concerning their emergency measures to the IEA secretariat (article 32 IEP) on a continuous basis and the IEA monitors Member States’ compliance with the IEP. The IEP does not, however, make any provision for the enforcement of any obligations imposed by the IEP. The Spanish OMM also stipulates that Spain must immediately inform the IEA in case Spain releases emergency stocks (article 39(1) OMM).