Conclusions from the Agency's control activities in 2019

The main goal of the control activity carried out by the Agency's employees is to verify the state of emergency stocks of crude oil and petroleum products (hereinafter referred to as "emergency stocks") protected by recognized stock keepers in terms of quantity and quality. Controls are carried out in accordance with Act No. 218/2013 Coll. on Emergency stocks of oil and petroleum products and on dealing with state of oil emergency and on the amendments and supplements of certain acts as amended, the Statutes of the Agency, concluded contractual relations and internal regulations of the Agency with the aim of ensuring that emergency stocks are continuously available and ready to be used in state of oil emergency.

The importance of carrying out this control activity, as well as the existence of the Agency, was confirmed in practice in year 2019, even during an extremely serious situation in May 2019, when crude oil supplies to the Slovak Republic via the Druzhba pipeline were stopped for several weeks.

The amount of emergency stocks in the Agency's possession, which are protected by recognized stock keepers, are checked by the Agency's staff on a quarterly basis. Emergency stocks are stored in a total of 8 storage terminals located on the territory of the Slovak Republic. Controls of the amount of emergency stocks by the Agency's employees are carried out by physical checks at the storage location, in the case of crude oil stocks, by checking the condition through the terminal's central dispatch, and in the case of petroleum products, by a separate check of each storage tank through a measuring device equipped with each storage tank.

The quality of emergency stocks is checked at least twice a year by taking samples from each storage tank and performing qualitative analyses in an accredited laboratory. The purpose of the qualitative analyses is to verify that the individual qualitative parameters of the stored stocks meet the requirements of the relevant technical standards, so that the emergency stocks, if it is necessary to release them, can be directly used to ensure the supply of crude oil and oil products to the economy and population of the Slovak Republic.

The control activities carried out by the Agency in the area of maintaining emergency stocks in 2019 demonstrated the following:

1. Recognized stock keepers maintain emergency stocks in the prescribed quantity on the basis of storage contracts concluded between the Agency and recognized stock keepers. The Agency thus fulfills its legal obligations to maintain emergency stocks in the level of 90 days of average daily net imports (at the end of 2020 year at the level of 96 days) and Slovak Republic fulfills its international obligations in the field of oil safety.

2. Emergency stocks are of satisfactory quality in accordance with the requirements of the relevant technical standards. Emergency stocks are thus constantly ready to be used in the need to solve the state of oil emergency.

3. Emergency supplies are continuously available and ready for immediate release.

4. Emergency stocks are maintained in the structure prescribed by legislation and stock keeping contracts. The ratio between reserves of crude oil and petroleum products is within the range allowed by legislation.

The above-mentioned emergency situation during the year 2019 consisted in the complete discontinuation of crude oil supplies to the territory of the Slovak Republic. From April 23, 2019, the Slovak Republic started receiving reports about the emergency situation on the Druzhba pipeline. Refineries in Belarus have noted the deterioration of the quality of Russian crude oil supplied through this pipeline and have warned European customers to take appropriate measures, as the crude oil in question can seriously damage refinery equipment. The information was subsequently confirmed by customers in Poland, to whom crude oil of unsatisfactory quality was transported from Belarus by the northern branch of the Druzhba pipeline.

The reason for the problems was crude oil contaminated with an excessive level of organic chloride, this crude oil is transported from the Russian Federation via the Druzhba pipeline to Belarus, Poland, Germany, Hungary, the Czech Republic and Slovakia. The mentioned substance is used in the crude oil extraction process, but it must be separated from the oil before transport, because it can damage the technological equipment of the refinery. In certain cases, the level of organic chloride in the deliveries in question was exceeded by up to 30 times above the permitted limit. The problem with the quality of crude oil was confirmed by the Russian Ministry of Energy, while the monopoly operator of oil pipelines Transneft tried to eliminate the problem as soon as possible.

Following this finding and at the request of the SLOVNAFT. refinery, which refused to take over the contaminated oil due to possible damage to the refinery's technological equipment, TRANSPETROL, a.s., the operator of the Druzhba pipeline in our territory, on April 25, 2019, suspended the transportation of this contaminated crude oil from the Russian Federation, as well as Belarus, Poland, Hungary, Germany and the Czech Republic.

It was a very serious, unprecedented situation that happened for the first time on such a large scale during the 60-year history of the Druzhba pipeline. Based on numerous operational negotiations, the Agency's board of directors decided to carry out a temporary short-term exchange of emergency stocks until May 31, 2019 in the form of exchange of crude oil stocks for oil products or oil products in the finalization phase of the refining process. The aim of this exchange was mainly the temporary effective diversification of the Agency's emergency stocks, as well as the provision of continued supplies of crude oil for the needs of the economy of the Slovak Republic.

Mostly, thanks to the quick and operative action of all parties involved, it was possible to avoid the declaration of an oil emergency, as was the case in other affected countries. Only thanks to the cooperation of the private and public sectors, the Agency secured replacement supplies of crude oil so that refinery production and supply of oil products could continue undisturbed in the Slovak Republic. Thanks to this prompt reaction, it was not necessary for the government to take any restrictive measures, and the economy and the population of the Slovak Republic did not feel any negative consequences of the interruptions in the supply of petroleum products.