Michael Ahern (Cork East, Fianna Fail)

I move: "That the Bill be now read a Second Time."

Molaim an Bille um an nGníomhaireacht Chúltaca Ola Náisiúnta don Teach. For the convenience of the House, a detailed explanatory memorandum has been published, which provides a synopsis of the Bill's provisions. I do not propose to focus on the detailed provisions of the Bill at this stage. Instead, I will focus on the backdrop against which this Bill is being introduced, as well as the general policies outlined therein.

As a commodity traded on global markets, the market determines the price of crude oil. Despite recent geopolitical uncertainties in oil producer regions, supply continues to exceed demand and has not been disrupted. Growing global energy demand is likely to result in high prices remaining with us for the foreseeable future.

As the second largest energy market in the world, the EU has a growing dependency on energy imports. The sharp rise in oil prices also impacts on jobs and economic growth. Europe has also been to the forefront in embracing the issue of climate change and has set ambitious targets on emissions reductions, promoting new and renewable energy sources and developing low carbon technologies.

The issue of security of energy supply is one of the priority areas identified on the European Commission Green Paper on energy published earlier this year. The Green Paper sets out the framework for a common energy strategy encompassing security, sustainability and competitiveness. The Government welcomes the new focus at EU level on energy issues, while welcoming the recognition that certain decisions including energy mix remain the prerogative of member states.

Irish energy policy is set in the global and EU context. While we share many of the same challenges, Ireland has a number of specific characteristics. We are geographically isolated from the main EU market and small in scale with a customer base of less than 2 million. Geography also presents challenges in terms of security of oil supply. As an island with no indigenous oil production or interconnecting pipeline infrastructure, we rely on sea-borne imports mainly from refineries on the UK west coast. We have little in the way of proven indigenous fossil fuel resources and unlike some other European countries there are no significant hydrocarbon resources.

Ireland has grown increasingly dependent on oil to fuel its economic growth. Continued economic growth is expected to give rise to further increases in the volume of our energy requirements, even as the relative importance of oil to output continues to decline. Oil continues to be the dominant energy source, with that dominance increasing from a share of 46% in 1990 to 58% in 2005. Car usage has grown substantially in Ireland in recent decades, powered by a rapid growth in affluence. The amount of oil used for transportation in Ireland has more than tripled between 1972 and today, leaving Ireland consuming at least 50% more per capita than the EU average.

Alongside these constraints significant opportunities also exist. The creation of an all-island energy market is an opportunity to increase the scale of the energy market and enhance competition, in the interests of consumers North and South. This is the first step towards the creation of a regional energy market within the EU.

In line with the global shift to renewable energy technologies, in terms of natural resources and research capabilities Ireland is well placed to develop renewable energy. This will have important environmental, economic and social benefits. Action on energy efficiency will have direct benefits for the economy, the environment and individual consumers.

The Government's forthcoming energy policy Green Paper will set out the framework for national energy policy for the medium to long term. The policy proposals will be informed by projections on growth in energy demand and related economic and demographic trends as well as the key imperative to ensure sustainability and security of energy supplies and fuel diversity. Successful delivery of national energy policy objectives requires a sustained and cohesive effort across Government, in conjunction with all stakeholders. A key plank of policy to address the challenges, is to move towards greater deployment of renewable energy and a more energy efficient economy.

An ambitious agenda across the three principal renewable energy sectors, namely, renewable electricity, transport and heat, provides supports to develop the various renewable technologies. As the Irish economy continues to grow, giving rise to increased energy demand, energy security remains one of the key concerns facing Irish business. Our ability to continue to attract high levels of foreign direct investment and to provide a supportive environment for Irish industry generally will depend on our capacity to deliver a secure and uninterrupted energy supply. This Bill will allow the Government to enhance arrangements already in place in regard to security of oil supplies.

Oil is a global market and the management of major oil supply disruptions requires an international response. At international level, EU member states and member countries of the International Energy Agency, IEA, have had significant obligations to maintain emergency oil stocks. As a member of the IEA, Ireland is required to maintain emergency oil stocks equivalent to at least 90 days of net imports in the previous year. The EU imposes a similar requirement based on consumption. For some years the National Oil Reserves Agency, NORA, has been delegated responsibility for maintenance of emergency stocks.

Ireland also has an associated obligation to maintain contingency plans, including arrangements for the release of strategic oil reserves, so as to minimise the adverse effects of an oil supply disruption within the framework of a coordinated international response.

Ireland has undertaken to operate demand restraint measures in certain circumstances by entering into the agreement on an international energy programme under which the IEA was set up. The agreement obliges participating countries to cut oil consumption by 7% if there is a reduction in supply of at least 7% and by 10% if the supply loss is of the magnitude of 12% or more. Compliance with the agreement guarantees participants a fair share of available oil stocks.

The Minister for Communications, Marine and Natural Resources has wide powers under the Fuels (Control of Supplies) Acts 1971 and 1982 in the event of an emergency to restrict the sale and distribution of petroleum products in order to conserve stocks. The Department actively engages with the National Oil Reserves Agency, and the oil industry on an ongoing basis on contingency planning issues. In the event of oil supply disruption, there would be immediate liaison with industry at the highest level to evaluate the local situation and arrange for a coordinated Irish response within the international framework.

Ireland's response to an oil supply emergency declared by the IEA, would be either the drawdown of NORA stocks or demand restraint measures or a combination of stockdraw and demand restraint measures. Stockdraw on its own can be authorised by the Minister. Other measures, such as control over the oil companies' stocks or the introduction of demand restraint measures, would require formal Government approval under the Fuels Acts 1971 and 1982.

The Fuels Acts provide for significant State intervention in the market in the event of a major oil supply crisis. Under this legislation, the Government may make an order authorising the Minister for Communications, Marine and Natural Resources to intervene whenever the Government is of the opinion that "the exigencies of the common good necessitate the regulation or control by the Minister on behalf of the State of the acquisition, supply, distribution or marketing of fuels" held by the private sector oil companies.

Once the Government order is made the Minister is empowered to make an order or orders in respect of a certain fuel or fuels. This means that in effect, the stocks held by the oil companies become part of the totality of emergency stocks under the Minister's control and direction. Detailed provisions in the orders give the Minister, for example, powers to regulate the sale of individual products to prevent hoarding or unnecessary topping up of fuel tanks by setting out minimum and probably maximum sales of particular products, especially petrol.

At this point it is useful to outline the background to the setting up of the National Oil Reserves Agency. Prior to 1995 the oil companies in Ireland were obliged to meet a substantial portion of Ireland's oil stockholding obligations. This system proved unsatisfactory however and, under the European Communities (Minimum Stocks of Petroleum Oil) Regulations 1995, responsibility for the maintenance of strategic stockholding was vested in the National Oil Reserves Agency.

For pragmatic reasons the agency was established as a subsidiary of the INPC. Since 1995, NORA has acted as the agent of the Minister for Communications, Marine and Natural Resources with the function of arranging for the holding of strategic oil stocks at a level determined annually by the Minister.

NORA has proved successful in dealing with its remit in a transparent and cost-effective basis. Its establishment in 1995 coincided with the emergence of the Celtic tiger and the phenomenal increase in the country's oil consumption since 1990. This increase has impacted on the volumes of strategic stock required to meet the 90 days obligation of the IEA, and the EU.

At 1 April 2006 Ireland's oil stock reserves were estimated at 108 days, a figure well in excess of the 90 days obligation. In the event of an international oil supply disruption, this level of emergency reserves is considered to be sufficient to ensure that Ireland could participate effectively in any internationally co-ordinated response. Given the disposal of the Bantry oil terminal and the Whitegate refinery in July 2001, NORA is the sole remaining subsidiary of the INPC. The INPC has had no operational capacity since July 2001. Its current activities are limited to finalising residual issues arising from the 2001 transaction and meeting requirements under company law arising from its role as parent company to NORA. It is against this background that the Government agreed that NORA should be established as an independent body under the aegis of the Minister for Communications, Marine and Natural Resources and should continue to have responsibility for the maintenance of emergency oil reserves.

In accordance with company law requirements, the Bill provides that the INPC shareholding in NORA will be transferred to the Minister for Communications, Marine and Natural Resources. The agency will continue to operate as a private limited company under the Companies Acts. The primary function of the agency will continue to be the maintenance of emergency oil stocks in line with the State's oil stockholding obligations to the EU and the lEA. Ireland's emergency oil stocks comprise wholly owned stocks held in Ireland by NORA and industry or major oil consumers; wholly owned stocks held by NORA in other EU member states under cover of bilateral agreements; and stock tickets held by NORA in other EU member states under cover of bilateral agreements.

The facility to hold stocks under cover of bilateral agreements is provided for in EU legislation. A member state may hold stocks in the territory of another member state, subject to a bilateral oil stockholding agreement being in place between the respective states. These agreements are government-to-government agreements. Under such agreements, the host country guarantees that it would not oppose the transfer of the oil in question to Ireland in the event of an emergency. The practice of holding stocks abroad is therefore in line with international practice. In the event of a major interruption in oil supplies, there would be no question of Ireland or any other oil-consuming country attempting to deal on its own with an interruption in oil supplies. If such a crisis were to occur, the response, including the release of emergency stocks and the identification of alternative sources of supplies, would take place primarily within the framework of the formal emergency regime developed and maintained by the lEA. To provide for interruptions of oil supplies, the Bill includes provisions for the release of oil stocks held by the agency at the direction of the Minister.

Since its establishment in 1995, NORA has never received Exchequer funding. It has been funded by a combination of a levy on disposals of petroleum products and by borrowings from commercial institutions. Since 1995, oil companies and oil exporters have been liable for the levy when NORA was delegated with responsibility for maintaining strategic oil stocks. The levy, which funds the holding and storage of oil and other operating expenses of the agency, is charged at the rate of 0.476 cent per litre on sales of petroleum products. It is applied to oil companies that use petrol, kerosene, gasoil and fuel oil for their own consumption and-or sales of these products within the State. The levy remains unchanged since 1995. The legislative proposals envisage that NORA's operating costs and expenses will continue to be funded by the levy. NORA will continue to administer and collect the levy and will continue to be funded by borrowings from financial institutions to incrementally build up reserve stocks.

The legislative proposals provide that oil consumer companies as defined in the Bill that hold reserves greater than 55-day reserves, based on the previous year's consumption, may claim an exemption from payment of the levy. This exemption is available to oil consumer companies under the European Communities (Minimum Stocks of Petroleum Oil) Regulations 1995.

Ireland's obligations to the EU and lEA require the provision of monthly returns relating to oil imports, exports and consumption, together with details of oil stocks held by NORA. These returns allow the EU and the lEA to monitor member states' compliance with stockholding obligations. The Bill includes provisions requiring the making of specific written returns by oil companies and oil consumers, and by NORA, within specific timeframes. The proposals on data provision do not include obligations on companies over and above obligations currently imposed. Provisions are proposed to provide for inspection and monitoring of oil companies and major oil consumers and provision is made for summary offences in the event of conviction for non-compliance.

NORA will continue to operate as a private limited company governed by the Companies Acts and independent of the INPC. In line with corporate governance obligations applicable to State bodies, and in the interest of transparency, NORA will be required to provide annual reports and accounts, together with such information as may be required by the Minister. To enhance the accountability of NORA to both the Minister and the Oireachtas, provision has been made for it to report to relevant Oireachtas committees. Overall, the Bill allows NORA to build on its existing strengths and provides it with the freedom to operate as a stand-alone agency delegated with responsibility for the holding and maintenance of national strategic oil stocks while at the same time ensuring appropriate public policy and corporate governance safeguards.

The Bill is one of a number of measures which will allow the Government to continue to drive forward its energy agenda. I am confident that its focus on the enhancement of oil security will have considerable benefits for Irish economic development in the decades ahead. I hope I have given the Deputies a reasonable summary of the policies underpinning the Bill. The Minister will be glad to provide any further information they require to facilitate its early enactment. I therefore look forward to hearing the views of Deputies and progressing the Bill into law at the earliest opportunity.

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