3. OIL

The vote of the United Kingdom to leave the European Union brings uncertainty to Ireland. The EU oil directive (2009/119/EC) is more prescriptive than the IEA stockholding obligation with regard to storage locations. EU member states can hold stocks in other EU member states only. Ireland holds 20% of its emergency stocks in the United Kingdom, with 9% located in Northern Ireland. It is unclear if the European Union will grant an exception for Ireland to keep using storage locations in the United Kingdom, be it Great Britain or Northern Ireland.

Assessment

Oil remains the dominant source in Ireland’s energy mix, although its share in TPES and total final consumption has gradually declined over the last decade. Oil demand has started to pick up since 2014 and rose to 154 kb/d in 2017.

There has been no commercial production of crude oil up to now. However, the Irish government continues to support investment in exploration and production, which has recently shown progressive achievements. For instance, the Atlantic Margin Licensing Round 2015 received the largest number of applications in any licensing round held in the Irish offshore. The Irish government should continue to promote exploration opportunities while ensuring that these opportunities lead to successful production.

The future of oil demand depends on the transport sector, which accounts for around two-thirds of Ireland’s total oil consumption. The government has set up various ambitious plans to decarbonise the transport sector, including promotion of electric vehicles, compressed natural gas infrastructure and alternative fuels (see Chapter 6 on “Energy and climate”). The BOS is the primary measure to increase the share of biofuels in the transportation fuel mix; the obligation has been met each year since the BOS commenced. A key challenge for biofuels in Ireland is the low level of domestic production and high reliance on biofuels imports (81% in 2017). It is expected that there will be more opportunities in Ireland to develop commercial production of biofuels as the BOS increased to 10% in 2019 and set to reach 11% in 2020. Industry should plan to ensure sufficient imports to meet the anticipated increase in demand for biofuels.

The residential sector is the second-largest oil consumer. The government notes the importance of decarbonising home heating (mainly through replacement of individual oil boilers) as a vital component in the energy transition. However, the government’s decarbonisation plan lacks clear and comprehensive long-term targets. Access to realistic and updated forecasts would allow private sector companies in the oil sector to better manage their risks and build business models around the low-carbon energy future, without a detrimental effect on the security of oil product supply.

Given the country’s heavy reliance on oil imports, the government underpins market flexibility as being key to the SoS, and promotes a privatised, deregulated and competitive fuel market. The acquisition of the only refinery in the country (Whitegate by Irving Oil in 2016) was therefore a positive development that contributed to enhancing Ireland’s refining capacity. The development project that aimed to increase the production of diesel and lighter products is highly recommendable. The IEA encourages the government to ensure there are no barriers to exploitation of the potential of biofuels, for the SoS and low-carbon transition purposes.

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3. OIL

Around two-fifths of domestic oil product demand is covered by the Whitegate refinery; the rest is imported, mainly from the United Kingdom. The island of Ireland (Northern Ireland and Ireland) has six commercial oil terminals, with delivery orbits of 150 km covering the whole territory of the island, and with capacities exceeding present import needs. This creates flexibility for the fuel market and allows mitigation of potential supply constraints in case of outages at the Whitegate refinery.

Ireland meets its IEA stockholding obligation through public stocks owned by the Irish stockholding agency NORA. Commercial stocks held by industry and public stocks are counted. The use of domestic stocks is critical to Ireland’s emergency response policy, as Ireland is entirely dependent on shipping for all oil imports, and the dominant share of oil supply comes from the North Sea via its only refinery in Cork. Ireland has therefore been pursuing a policy of rebalancing its emergency oil reserves by maximising NORA stocks stored in Ireland. At present, some 20 days of stocks are held in primary storage facilities that provide direct access to the market by road tanker trucks. The availability of stocks held in secondary storage facilities (oil terminals with jetties from which oil may be transported by ship to primary storage) is ensured by contracts from NORA with shipping companies.

Recommendations

The government of Ireland should:

Develop a transparent and predicable decarbonisation policy for the transport sector, to inform investment decisions in the oil, gas and electricity sectors.

Identify the risks raised by a high dependence on biofuel imports and take mitigating actions to ensure security of supply.

References

DCCAE (Department of Communications, Climate Action and Environment) (2017), National Mitigation Plan, DCCAE, Dublin, www.dccae.gov.ie/en-ie/climate- action/publications/Documents/7/National%20Mitigation%20Plan%202017.pdf.

IEA (International Energy Agency) (2018a), World Energy Balances 2018, OECD/IEA, Paris, www.iea.org/statistics/.

IEA (2017b), Oil Information 2018, OECD/IEA, Paris, www.iea.org/statistics/. IEA (2018c), Energy Prices and Taxes 2018, Quarter 3, www.iea.org/statistics/.

IGEES (Irish Government Economic & Evaluations Service) (2017), The Oil Market in Ireland – An Update 2017, IGEES, Dublin, www.revenue.ie/en/corporate/documents/research/oil-market-2017.pdf.

IEA (2018c), Energy Prices and Taxes 2018, Quarter 1, OECD/IEA, Paris, www.iea.org/statistics/.

NORA (National Oil Reserves Agency) (2018), The Biofuels Obligation Scheme Annual Report 2017, NORA, Dublin, www.nora.ie/_fileupload/457-18X0074%20- %20BOS%20Annual%20Report%20for%202017.pdf.

Purvin & Gertz Inc. and Byrne O'Cleirigh (2012), Study of the Strategic Case for Oil Refining Requirements on the Island of Ireland, https://www.dccae.gov.ie/enie/energy/publications/Documents/9/StrategicCaseforOilRefiningIrelandRedactedfin.pdf.

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