New Zealand’s participation in the International Energy Programme
New Zealand participates in the International Energy Agency's International Energy Programme to protect against disruption to international energy supplies. Our compliance with the programme’s 90-day oil stocks obligation has, since 2007, been met through a combination of domestic commercial stocks and 'ticket' contracts for stocks held in other IEA member countries.
Basis of the International Energy Programme
The legal basis for the IEA is the Agreement on an International Energy Programme, which has been signed by all member countries. The Agreement enables co-ordinated and collective action by requiring IEA countries to hold oil stocks equivalent to at least 90-days of net oil imports and to release stocks, restrain demand, switch to other fuels, increase domestic production and, if necessary, share available oil in a timely and co-ordinated manner in the event of a significant oil supply disruption.
The International Energy Programme has been formally activated twice - in 2005 in response to the disruption to oil supplies caused by Hurricane Katrina, and in 2011 in response to a prolonged disruption to Libyan oil production.
During the 1991 Gulf War IEA members (including New Zealand) voluntarily implemented measured to restrain oil demand and boost supply. Both these actions are credited with swiftly calming a volatile oil market.
New Zealand compliance with the 90-day oil stocks obligation
In recent years, New Zealand's commercial inventories have been insufficient to meet the 90-day requirement.
To meet our obligations, the Ministry of Economic Development makes up the shortfall by tendering for 'ticket' contracts (an option to purchase stock in an IEA declared emergency) with major oil companies both at home and overseas.
The New Zealand Government has entered into bilateral Arrangements with the governments of Australia, United Kingdom and Denmark, and has concluded formal Agreements (treaties) with the Netherlands and Japan to enable stocks held in those countries to count towards New Zealand's International Energy Agency obligations.
Through the use of ticket contracts, New Zealand has been compliant with its obligation to hold stock covering 90-days of net import demand since 1 January 2007.
The average price of ticket contracts between 2007 and 2012 has ranged from NZ$13/tonne/year to NZ$30/tonne/year. The price of ticket contracts depends on the quantity and location of stock and also on the dynamics of the oil market when the Ministry goes to tender.