Gov’t revives ‘strategic oil reserve’ plan amid rising prices

As oil market sentiments gain steam, the Philippine government is targeting to resuscitate its long planned “strategic petroleum reserve” so the industry could have supply buffer either in times of crisis or pandemic.

For that, Energy Secretary Alfonso G. Cusi said he will continually task state-run Philippine National Oil Company (PNOC) to finally complete the study on the country’s proposed oil reserve facility.

The energy chief said he wants the oil stockpiling program started “soonest,” and if possible for the underpinning study “to be completed before the year ends.”

As gleaned from initial conceptual designs dangled by PNOC, the strategic reserve could initially be done via “floating storage facility;” then a longer term plan for onshore facility could eventually be cast.

Cusi himself indicated that it should just be a “small-scale reserve” and not exactly the magnitude being required by the International Energy Agency (IEA) for its member-countries.

The energy chief said this will be an “oil buffer facility” wherein private sector participation must be encouraged, especially so since this will be requiring sizeable funding and technical expertise on its operations.

He said the PNOC-designed study is taking time because “there’s a lot of issues… it’s not as simple as putting oil in the container and keeping it. There’s a lot of variables.”

To recall, oil prices in the world market had collapsed to the level of US$15 to US$18 per barrel at the intensity of lockdowns in various countries. And with the portended reopening of many economies, prices have been rising back to the level of US$32 to US$35 per barrel in recent days.

Taking cue from that development, experts in the oil sector have noted that escalating prices may once again tear down or bury the government’s bid for an oil stockpile venture.

It is no secret that the government-owned company as well as its subsidiary PNOC-Exploration Corporation (PNOC-EC) had been targeting to import diesel since two years ago, but questions on storage and distribution networks hobbled the venture.

On the "oil stockpile" plan, there is no clear direction yet how the government will carry it out, especially since the proposal of the legislative branch is just for the country to have “oil diplomacy arrangements” with ally-countries and not necessarily to set up a physical storage facility in the Philippines.

That fundamentally differs with the ‘oil storage’ development paradigm that both the DOE and PNOC had espoused, hence, it is worth monitoring how the entire investment trajectory will eventually shape up.