For the formation of oil reserves in the period from now until the end of 2028, 44,5 million euros will be needed, of which 7,5 million have been provided for this year as a grant from the European Union to overcome the energy crisis, and the rest of the money will be provided through a special a fee that will be paid by citizens and the economy in the amount of three cents that will be added to the retail price of fuel.
According to the bill, the Hydrocarbons Administration and every importer of oil derivatives that imports 15.000 tons or more of unleaded gasoline and/or gas oils are required to form mandatory reserves.
This is defined by the Bill on Security of Supply of Oil Derivatives, which has entered the parliamentary procedure and for which the Ministry of Energy and Mining is seeking an urgent adoption procedure.
The issue of mandatory reserves was assessed, within the negotiations on the accession of Montenegro to the European Union, as a key criterion for the opening and closing of the accession negotiations on Chapter 15 - Energy.
Reserves will serve in the event of a risk of disruption or in the event of a disruption in the supply of oil derivatives
Tender for the adaptation of the reservoir in Bar
The state plans to keep the oil reserves in the reservoirs of the state Montenegrobonus in Bar, for the modernization of which it needs to spend 1,5 million euros out of the 7,5 million allocated non-refundable from the EU, while the rest of the money will be spent on the purchase of reserves of oil derivatives.
For the needs of adaptation and modernization of the reservoir, the Ministry of Energy and Mining should issue a tender for the execution of works and the supervision of the works, which should last six months, and the first quantities of oil reserves will be purchased in 2025.
At the meeting of the Council of Ministers of the Energy Community (EC), which was held last December in Vienna, the Secretariat of the EC announced that in the course of 2024, it will initiate the adoption of a decision on misdemeanor measures in connection with the fulfillment of obligations from the Agreement on the Formation of the Energy Community, which related to the implementation of the EU Directive no. 2009/119/EC on mandatory reserves of oil and/or oil derivatives, if the stated obligation is not implemented as soon as possible.
In the explanation of the proposal of the Law, it is stated that the compensation is the designated income of the Administration for Hydrocarbons and the importer of oil derivatives as the obligee of the formation of mandatory reserves. The management fee is used to finance the acquisition of reserves of oil derivatives and cover all costs related to mandatory reserves, while for importers it covers the cost of financing and the risk premium, the cost of storage and the cost of reserves in intangible form (tickets) during the duration of the obligation.
85 percent of diesel and 15 percent of gasoline will make up mandatory reserves, which proportionally corresponds to their market relationship
The amount of the fee is determined by the Government on the proposal of the Ministry of Energy and it is planned that during the period from 2024 to 2028 (in which the intensive procurement of physical reserves of oil derivatives is planned) the Administration will receive two cents, and the importers will receive one cent per liter of fuel.
"Given that the estimated annual consumption of motor gasoline, gas oils and LPG is at the level of 430.000.000 liters/kg, the average annual cost for citizens and the economy in the name of the formation of mandatory reserves in the period 2025-2028. year is estimated at 12.900.000 euros. After the formation of physical reserves of petroleum derivatives in the property of the Hydrocarbons Administration is completed by the end of 2028, the amount of compensation from 2029 onwards will be reduced and is estimated at two cents, of which the Administration and importers would receive one cent each. it is stated in the explanation of the bill.
Dedicated account in the Central Bank
The Directorate for Hydrocarbons will open a special account with the Central Bank to which the money from this fee will be deposited, which can only be used for this purpose.
The draft law defines that the Hydrocarbons Administration will procure the necessary quantities of oil reserves at a public tender, which will be stored in the storage capacities given to it for use and management, and/or for which it has concluded a storage contract.
"The warehouse for mandatory reserves of petroleum products must meet the conditions prescribed by technical regulations and have infrastructure for unloading and loading of petroleum products with at least two types of transport. A contract on storage can be concluded with an energy entity that has a license to store oil and oil derivatives, in accordance with the law regulating energy, that is, the equivalent regulation of the country in which the storage is carried out", the proposal of the Law states.
Mandatory reserves of oil derivatives can be stored by the importer in his own warehouse based on a license for the storage of oil and oil derivatives, or in a warehouse for which he has a storage contract.
The administration or the importer can store mandatory reserves of oil derivatives in the EU countries, ie the Energy Community based on the storage contract, upon prior approval of the Ministry and the country where the mandatory reserves of oil derivatives will be stored. This legal solution was given so that, as explained, importers who do not have warehouses in Montenegro would keep reserves in their home countries.
Oligopoly in the market
"The oil derivatives market in Montenegro is characterized by a pronounced oligopoly, that is, several oil companies (four precisely - Jugopetrol, Ina CG, Petrol CG, Hifa Oil CG), import over 96% of the total amount of oil derivatives. Of the mentioned companies, only the Jugopetrol company has storage capacities in Montenegro, and all the companies have parent companies in Greece, Croatia, Slovenia or Bosnia and Herzegovina, which have storage capacities in those countries", it was stated in the explanation of the proposed law.
The Ministry of Energy is obliged to determine by March 1 of the current year the minimum amount of mandatory reserves of oil derivatives for the period from July 1 of the current year to June 30 of the following year, which will correspond to the amount for 90 days of average daily net import or 61 days of average daily consumption.
Monstat will submit these data on the annual quantities and structure of oil reserves to the European Commission (EC).
Importers and the Directorate for Hydrocarbons are obliged to allow the representatives of the Ministry of Energy, EC access to all locations where mandatory reserves of oil derivatives are kept and to inspect the documentation and registers related to them.
"The quantity and structure of mandatory reserves of oil derivatives that should be formed by importers, that is, the Administration, for the period after the entry into force of this law until June 30, 2025, will be determined by the Ministry within 90 days from the date of entry into force of this law by calculating based on data on import, export and consumption of oil derivatives and the amount of commercial reserves of oil derivatives", it is stated in the explanation of the proposal of the Law.
The Council will monitor the regularity of market supply
The proposal of the Law also defines that the Government will form a Council for ensuring the safe supply of the market with oil derivatives, which will have a president and eight members.
The key task of the Council will be to monitor the regularity of supplying the market of Montenegro and the member states of the EU and/or the Energy Community with oil derivatives. It will be formed for four years and will be financed from the budget of the Ministry of Energy.
"The council consists of two representatives of the Ministry of Energy, the head of the Hydrocarbons Administration, a representative of the state administration body responsible for financial affairs, a representative of the regulatory body for energy, a representative of the administration body responsible for customs affairs, one representative each of the two energy entities with the largest share of wholesale traffic on the market of oil derivatives and a representative of an energy entity that performs the energy activity of retail oil derivatives", it is specified in the draft law.
The Council will, among other things, propose to the Government the abolition of measures to solve disruptions in the supply of oil derivatives.
The council will be elected within two months from the date of entry into force of this law.
The fee will also bring 2,7 million VAT annually
During 2024, no procurement of oil derivatives is planned, but only the accumulation of collected money, restoration of storage capacities, completion of the legislative framework and institutional strengthening, that is, the creation of necessary preconditions for the physical procurement of reserves that would be purchased in the first half of 2025.
"Therefore, in 2024, the funds collected in the name of fees for mandatory reserves will be in significant excess compared to the planned expenditures in this year and should be budgeted for the next year, in addition to the estimated income plan for 2025 based on fees ", it was clarified in the proposal of the Law.
In addition to the inflow in the name of compensation for mandatory reserves to the dedicated account of the Hydrocarbons Administration at the budget, income from VAT will also be generated for compensation for mandatory reserves.
"Given that compensation for mandatory reserves is included in the tax base when determining the retail price of petroleum products. The planned income in 2024 based on VAT on compensation for mandatory reserves is about 225.000 euros per month, while for the period from 2025 to 2028 it is about 2.710.000 euros per year.
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