National Oil Reserve Agency boss: Middle East conflict has caused 'absolute uncertainty'

NORA generally holds 90 days’ worth of oil reserves – the release of those barrels would reduce that reserve to roughly 80 days. File picture

The head of Ireland’s oil reserve agency has described the ongoing conflict in the Middle East as an “absolute uncertainty” and said further releases of supply from the reserve may be needed to counter shocks.

Dr Frank Bergin, chief executive of the National Oil Reserve Agency (NORA), told the Public Accounts Committee that releases from Ireland’s oil reserve are generally dictated by the International Energy Agency, adding that that body has “indicated” that it is not currently looking at an additional release of supply.

In March NORA, along with other international oil reserve agencies, agreed to release more than 1.6 million barrels of oil into the international markets to bolster supply which has been significantly disturbed by the ongoing closure of the Strait of Hormuz.

NORA generally holds 90 days’ worth of oil reserves – the release of those barrels would reduce that reserve to roughly 80 days.

“The reality is these releases happen from time to time,” Dr Bergin told the committee. “However, we have to realise that what is happening in the Middle East is absolute uncertainty and none of us have ever seen anything like it before.

“So could we see another release? Yes we could,” he said.

He said that “you cannot cut international oil production by 20% and expect life to carry on as normal”. He added that the reports he has seen from the IEA would indicate that the recovery time for supply from the Strait of Hormuz, should the crisis resolve, “would be months, not immediate”.

Dr Bergin did argue repeatedly however that the recent fuel protests seen around Ireland had not been an issue of supply, but of distribution.

“Blockading a facility does nothing to us, our reserves are sitting at terminals around the country. At the blockade there was plenty of product, the issue was distributing it around the country,” he said, while acknowledging that “the risk of distribution remains an issue”.

Ireland’s oil reserve stands at about 1.7 million tonnes, valued at about €950m. Dr Bergin said that the timeframe to rebuild Ireland’s stocks back up to 90 days would be dependent on the European Commission and the IEA. “When the crisis is over they will ask agencies to rebuild their stocks,” he said, adding that bank loans are typically obtained to facilitate such procurement.

“Our 90-day reserve is essentially an insurance policy. I think it’s appropriate we have that security,” he said.

The agency itself is entirely funded by fossil fuel levies applied by the Government, and has a €40m operating budget, with about €33m of that allocated to storage costs. Only 60 days of the reserve is physically held in Ireland, he said, while there are “no plans” to increase the size of the reserve at present.

Dr Bergin said the 2c per litre levy applied by NORA is not set by the agency, but is dictated by Government policy.

Regarding the potential impact of the Middle Eastern conflict on the aviation industry, with many holidaymakers having expressed concerns that their flights could be cancelled, Dr Bergin said that in terms of jet fuel the agency maintains a 70-day reserve.

He said that all of Ireland’s supply of aviation fuel comes into the country via Dublin Port from the UK, and that the fuel crisis has impacted that delivery path to an extent.

He added however that if there were a 20% cut in jet fuel supply then NORA “would move to fill that gap” adding that “in reality” the agency is a in a position to cover a hypothetical shock of that nature for about a year.