The new Law on Oil and Oil Derivatives
Author: Ante Župić, Attorney-At-Law
Introduction
Act on Oil and Oil Derivatives („Official Gazette“, Nr. 19/14; Act;) entered into force on 12th Feb. 2014, replacing the previous Law (OG. 57/06,18/11 and 144/12.)[1].
The Act lays down rules aimed at ensuring high level security of oil supply, as well as liberalized conditions for trade, transportation and storage of oil and petroleum products according to market principles, open market access and the third party access to the market. The Act provides for intervention plan in the event of extraordinary disturbance in market supply of oil and petroleum products as well as maintaining minimum operational and mandatory crude oil and/or petroleum products’ stocks [2].
Liberalization of Prices
Considering the entry to the market of more economic operators, the Act repealed Ordinance on determination of highest retail prices for petroleum products, as well as Pricing Regulation of LPG (Liquefied Petroleum Gas) which have so far determined the maximum retail prices on the market. The Act enumerates energy activities pursuant to the Energy Act (OG 120/12) allowing the free formation of prices, when placing them to the market, provided that the technical and legal requirements for obtaining licenses for the particular energy activities are met.[3] The same applies also for trade with biofuels.[4]
Petroleum products placed on the market shall comply with the requirements prescribed by the regulations on the quality of liquid petroleum fuels. Price for the crude oil and petroleum products shall be determined in accordance with the rules governing market relations. Exceptionally, the Croatian Government may, for the purpose of consumer protection, market regulation, or other legitimate reasons, temporary prescribe the highest level of retail prices for certain petroleum products, for a continuous period of maximum 90 days[5].
Energy companies are required to submit reports to the Ministry of Economy relating to imports of oil and oil derivatives, considering the amount, origin, price and quality, information about planned, initiated and completed investment projects, functioning of power plant in the case of temporary or permanent cessation of work, along with the planned repairs.[6]
Operational Stocks
The Act contains rules in order to increase the security of supply of petroleum products by requiring storage of petroleum products, in quantities that depend on the companies’ respective market shares. Operating reserves are formed for the following petroleum products: gasoline, diesel fuel, gas oil, fuel oil, jet fuel and liquefied petroleum gas [7].
Compulsory stocks shall be formed at least in the amount of 90 days of average daily net imports or entry or 61 days of average daily domestic consumption of petroleum products in the previous calendar year, whichever amount is greater. [8]
Compulsory stocks can be kept in finished products, crude oil and in dematerialized form, also in the form of option contracts on the purchase of goods according to predetermined criteria in a given time period, and held in storage that can be used for wholesales of petroleum products, which may be also located outside of the country, in cases of lack of available capacity.[9]
Regulatory Aspects; Agency for Oil
The Act prescribes the obligation for the Ministry to coordinate with the European Commission and the International Energy Agency. Cooperation includes any questions about the security of the oil and petroleum products, especially in the case of disturbance in market supply of oil and petroleum products, registry inventories and statistical summaries of the state compulsory and commercial stocks of crude oil and petroleum products.[10]
The Act also prescribes the competencies of the Agency for Oil, the regulatory authority responsible for ensuring compulsory stocks of oil and petroleum products, and authorized for the formation, maintenance and selling of compulsory stocks of oil and petroleum products[11].
[1] Art. 33. Act
[2] Art. 1 (1); harmonized to EU 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
[3] Art. 4
[4] Art. 5 (1) and 6(1)
[5] Art 8 and 9
[6] Art. 12 (1) and (2)
[7] Art. 13 (2)
[8] Art. 14 (1) and (3) and 15 (1)
[9] Art. 16 (1) (2) (3) and (5)
[10] Art. 10 (1) and (2)
[11] Art. 18 (1) and 20 (1)