Montenegro will need €44.5 million to establish oil reserves by the end of 2028. Of this amount, €7.5 million has been secured as a non-repayable aid from the European Union for this year to help overcome the energy crisis. The remaining funds will be sourced through a special fee paid by citizens and businesses, adding three cents to the retail price of fuel.
According to the proposed law, the Hydrocarbons Administration and each importer of oil derivatives importing 15,000 tons or more of unleaded gasoline and/or gas oils are required to form mandatory reserves.
This obligation is defined in the Draft Law on the Security of Supply of Oil Derivatives, which has entered the parliamentary procedure and for which the Ministry of Energy and Mining is seeking urgent adoption.
The issue of mandatory reserves is considered crucial for opening and closing accession negotiations on Chapter 15 – Energy in the framework of Montenegro’s EU accession negotiations.
The reserves will be used in case of supply disruptions or risks thereof.
Tender for tank adaptation in Bar
The state plans to store oil reserves in the state-owned Montenegrobonus tanks in Bar, with €1.5 million of the €7.5 million EU grant allocated for their modernization. The remaining funds will be used to procure oil derivative reserves.
The Ministry of Energy and Mining will issue a tender for the adaptation and modernization of the tanks, with the work and supervision expected to last six months. The first quantities of oil reserves will be purchased in 2025.
At the Energy Community (EC) Ministerial Council meeting held in December last year in Vienna, the EC Secretariat announced it would initiate infringement measures in 2024 for failing to comply with the Energy Community Treaty obligations related to the implementation of EU Directive No. 2009/119/EC on mandatory oil and/or oil derivative reserves, if these obligations are not urgently fulfilled.
The draft law specifies that the fee will be the dedicated income of the Hydrocarbons Administration and oil derivative importers. The fee will finance the procurement of oil reserves and cover all related costs.
The government will determine the fee amount based on the proposal from the Ministry of Energy. During the 2024-2028 period, two cents per liter of fuel will go to the Hydrocarbons Administration, and one cent to importers.
Designated account in the Central Bank
The Hydrocarbons Administration will open a special account at the Central Bank for the collected fee, which will be used exclusively for this purpose.
The draft law stipulates that the Hydrocarbons Administration will procure the necessary oil reserves through public tenders and store them in designated facilities.
Oil derivative importers can store mandatory reserves in their own facilities or in contracted storage facilities, including in EU or Energy Community countries, with prior approval from the Ministry and the host country.
Oligopoly in the market
Montenegro’s oil derivatives market is characterized by an oligopoly, with four companies (Jugopetrol, Ina CG, Petrol CG, Hifa Oil CG) importing over 96% of total oil derivatives. Of these, only Jugopetrol has storage capacities in Montenegro.
The Ministry of Energy is tasked with determining the minimum quantity of mandatory reserves by March 1 each year, covering the period from July 1 of the current year to June 30 of the following year, equating to 90 days of average daily net imports or 61 days of average daily consumption.
These quantities will be reported to the European Commission by Monstat.
Importers and the Hydrocarbons Administration must allow Ministry and European Commission representatives access to all locations and related documentation.
Council to monitor market supply
The draft law also proposes forming a Council for Ensuring the Secure Supply of Oil Derivatives, consisting of a president and eight members, with a key task to monitor the regularity of supply in Montenegro and EU/Energy Community member states.
The Council, to be formed for four years, will be funded from the Ministry of Energy’s budget.
Fee will generate €2.7 million VAT annually
In 2024, no oil derivative purchases are planned; instead, the focus will be on accumulating funds, renewing storage capacities, and strengthening the legislative and institutional framework for procuring reserves in early 2025.
The collected fee will result in a significant budget surplus in 2024, planned for the following year, alongside VAT revenue from the fee.
The planned VAT revenue for 2024 is around €225,000 monthly, and approximately €2,710,000 annually from 2025 to 2028.
