France's petroleum industry is protesting parts of a government draft oil law expected to go into effect in January.
The law is to be submitted to Parliament this fall and will replace a law that has governed France's oil industry operations for most of the century.
And while the new law loosens and in some cases scraps controls, officials see costs that will affect the petroleum industry's competitiveness in Europe.
OIL SUPPLY SECURITY
Since 1928, France's oil industry has been governed by a law built on France's concern over oil supply security. It was designed to provide France with a competitive refining industry capable of satisfying domestic oil consumption and with national oil companies of international scope.
Under the 1928 law the government exercised a tight control over imports and was able through import quotas and market share apportioning to shape the market in favor of its national oil companies, Ste. National Elf Aquitaine and Total.
While accepted by international oil companies operating in France, the controls have become burdensome for French companies in recent years as their market tightened in France and widened to include the European Economic Community. In the past few years the government has loosened its hold, and import and price controls have been gradually lifted. Imports of about 2,200 bbl/month or more still need authorization.
DRAFT LAW
The draft law scraps import controls as incompatible with free circulation of oil products within the EEC but requires refiners to have on hand the equivalent of 3 months' oil consumption in security stocks. They can manage half that themselves and transfer half to a third party. Product importers will not be required to have actual stocks on hand but must pay the equivalent costs of their security stock obligation.
The draft law also maintains the obligation for refiners to provide data the administration might require, and operators must notify authorities of construction projects, shutdowns, or changes. The administration then has 1 month to oppose the project if it threatens oil supply security.
A major point of contention with the law is a requirement for crude importers to transport under French flag 5% of volumes imported beyond the previous year's level (OGJ, Oct. 12, Newsletter). The government said this is the only legal way of requisitioning tankers and enabling them to be escorted by warships in the event of an oil crisis.
In response to criticism, the government has promised that crude importers will be able to use the flag of Kerguelen, France's Antarctica possession, which will allow mixed French and foreign crews and cut costs by a third. Industry trade group Union Francaise de l'Industrie Petroliere (UFIP) noted for now the Kerguelen flag is the only short term way of improving the fleet situation. France has 14 long haul tankers, down from 73 in 1978.
And while many companies support UFIP's position on the draft law, BP France's President Raymond Bloch disputed the need for new law to replace the 1928 law. Protesting all obligations contained in the draft law, he said BP France would use all legal means to have them lifted. Total said it planned to discuss the matter with the EEC Commission.
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