Latin America running on empty with a lack of reserves
Latin America does not have a well-established infrastructure of strategic petroleum reserves (SPRs), with Chile the only country so far to seriously consider establishing such a facility
As Latin America’s largest oil importer, Chile requires refineries and liquid fuel importers to maintain stocks equal to 25 days sales over the previous six months. The country held stocks of 10.3 million barrels, equal to around 30 days of domestic demand, at the end of June 2012, according to the International Energy Agency (IEA).
The system, though, is largely self-regulated by the industry and there is no legal mechanism in place for the government to use the stocks in an emergency – a situation that has been criticised by outside bodies for leaving the country vulnerable during crises.
Chile, though, is a candidate country for membership to the IEA, which would make it the first Latin American country to join the organisation, and as part of the accession process it has studied ways to bolster regulation of its reserves and meet the IEA’s requirement for maintaining strategic reserves equal to 90 days of net imports.
The government has estimated that building strategic stocks to meet the 90-day requirement would cost nearly $4 billion, which it has said would be too expensive. Instead it is considering ways to better monitor industryheld stocks to ensure sufficient supplies are being held and establishing a public or public-private body to administer the reserves.
Outside Chile, most stocks are owned by the region’s major state-run companies, such as Brazil’s Petrobras, Venezuela’s PdV, Argentina’s YPF and Colombia’s Ecopetrol, which are also the largest refiners. As staterun companies they would undoubtedly prioritise supplies for domestic markets in the case of emergencies, but they would not play a role in a coordinated global stock release.
Like Latin America, Africa does not have any IEA member countries required to meet the organisations 90-day requirement.
South Africa, the region’s largest oil consumer, has an SPR, which is managed by state-owned PetroSA and the Strategic Fuel Fund. The strategic stocks are held at the Saldanha storage installation, near Cape Town. In March 2012 the facility held 10.3m barrels of oil, equivalent to about 19 days of South Africa’s oil demand. The country is also working on legislation to establish strategic stocks of finished products, though that effort has been delayed.
Elsewhere in Africa, Kenya created legislation in 2008 to establish a strategic petroleum reserve to cover 90 days of demand. State-run National Oil Company Kenya (NOCK) has been tasked with building and supplying the facility. Little progress has been made, though, and high costs have forced NOCK to look for partners in the private sector.
Figure 2: IEA member % share of stocks held