National Audit Office: The problems related to liquid fuel stockpiles must be resolved and risks must be managed

Toomas Mattson | 7/15/2009 | 12:00 AM

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TALLINN, 15 July 2009 - The audit conducted by the National Audit Office showed that the work of the Estonian Oil Stockpiling Agency in the formation of the state’s stockpiles of liquid fuel has been rather poor over many years – it has been unable to form the stockpiles at the speed and the quantity required by law. The required stockpiles will be formed by the end of 2009, but there is no efficient plan for their use in a situation of crisis.

The reports submitted by the Agency to the European Union and the Government showed liquid fuel stockpiles in 2007 and 2008 as higher than they actually were, because the Agency ignored the requirements of law and considered fuel that belonged to fuel companies as part of the state’s liquid fuel stockpiles, even though only fuel belonging to the state or fuel about which relevant contracts had been entered into should have been indicated. This means that the progress of the formation of fuel stockpiles looked better than it actually was.

The National Audit Office is of the opinion that allocations of money from the state budget for the acquisition of stockpiles of liquid fuel have not been based on actual requirements. The amounts of money have been unreasonably big and they have been granted too far in advance, because the Estonian Oil Stockpiling Agency has demanded money before the organisation of procurements and also considered the significant movements in fuel prices. As a result of this, the average monthly cash position of the Agency in 2006 to 2008 has been approximately 490 million kroons. The National Audit Office believes that the share capital of the Agency can be reduced or the state could withdraw approximately 400 million kroons.

The National Audit Office also points out that the minimum size (15 days) of the liquid fuel stockpiles stored in Estonia as required in the Liquid Fuel Stocks Act is too small to guarantee that the economy can function without problems if there are difficulties with fuel supplies. Considering the time required for the different stages (finding a tanker, marine transport, fuel pumping), delivering fuel stored abroad to Estonian petrol stations in winter would logistically take 22 to 29 days. The stock of diesel fuel and petrol stored in Estonia has been increased to 32-42 days since May 2009, which covers the requirement even if more fuel has to be brought from Finland, Sweden or Denmark by sea in difficult climatic conditions.

The National Audit Office believes that supervision of the preservation of the state’s security stockpiles of liquid fuel has also been insufficient. There is no state supervision of the preservation of the stockpiles and the control system implemented by the Estonian Oil Stockpiling Agency itself fails to create sufficient confidence that the stockpiles actually exist.

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The purpose of the audit was to investigate whether the Estonian Oil Stockpiling Agency has formed the state’s security stockpiles of liquid fuel as required and established sufficient supervision to guarantee that the stockpiles are well preserved.
In the course of the audit, the National Audit Office wishes to obtain the conviction that liquid fuel stockpiles can be operatively taken in use when necessary in order to guarantee that in a situation of crisis, the economy of Estonia can function without problems for 90 days.

The Member States of the European Union are obliged to create fuel stockpiles that correspond to the average national fuel consumption of 90 days. The stockpiles must consist of four types of fuel: petrol, diesel fuel, jet fuel and heavy fuel oil. The transition period granted to Estonia prescribes that stockpiles for 90 days must be gradually formed by the end of 2009 at the latest. The acquisition costs of the stockpiles are covered by the state by monetary contributions into the share capital of the Estonian Oil Stockpiling Agency, which until now have amounted to approximately two billion kroons.

Toomas Mattson
Director of Communications Services, National Audit Office
640 0777
513 4900
toomas.mattson@riigikontroll.ee
 

  • Posted: 7/15/2009 12:00 AM
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