IEA plans for emergency oil sales in case Y2K erupts
November 30, 1999
LONDON (Reuters) -- The International Energy Agency (IEA) has drawn up plans that could include emergency oil supply and rationing if the Y2K computer bug plays havoc with global energy flows, a spokesman for the West's supply watchdog said Tuesday.
The plan, to go for approval before the Paris-based group's board of governors on Dec. 10, would kick in if computer failures occur at the new year and cut deeply into industrialized countries' normal oil supply.
"In the documents setting up the IEA the director is given right to apply crisis mechanisms when there is turmoil in the oil markets," said IEA spokesman Scott Sullivan.
Mechanisms available to the IEA for dealing with major supply crunches include allocating oil reserves and restraining demand, for example with brief oil rationing, he added.
Y2K would have to cause massive problems to trigger the plan, if the IEA uses its normal definition of a crisis as when 7 percent or more of world oil supply is threatened.
Industrialized OECD countries consume around 45 million barrels per day (bpd) of oil, so around 3 million bpd would have to be cut to reach that watershed.
Sullivan declined to say how much oil the IEA plan would allow for release and added that the likelihood of supply chaos as a result of Y2K was low.
"We plan a response if there are major problems but we do not foresee that happening," he said. "The most likely outcome is a few small problems here and there."
This echoed a Monday declaration by OPEC powers Saudi Arabia and Venezuela as well as non-OPEC Mexico that Y2K was unlikely to affect world oil supply and that they would respond jointly to any possible glitch.
If any problem associated with Y2K does occur in the coming months, which is highly improbable, Saudi Arabia, Mexico and Venezuela, in coordination with other oil producing countries, would respond in the appropriate way," they said.
IEA members have to hold strategic stocks worth around 90 days of their combined import requirements of around 27 million barrels per day, giving them some 2.4 billion barrels in reserve.
Yet oil stocks in industrialized countries have been depleted by deep supply curbs from leading producers that fired world benchmark Brent crude to nine year highs above $25 a barrel just last week.
Major suppliers to the huge U.S oil market such as Nigeria are considered particularly likely to suffer Y2K disruption. Iraq has decided to wait and address any Y2K breakdowns after the event.
Tankers and terminals are seen as most vulnerable to Y2K problems and many oil companies have suspended oil loadings around the turn of the year.
Consumers' winter supply worries have deepened as Iraq suspended its 2.4 million bpd of exports until at least early December in a spat over its oil-for-food deal with the United Nations.
The IEA released oil during the Gulf crisis nine years ago when it added around 15 million barrels to world flows as crude prices briefly spiked above $40 a barrel.
The new IEA plan was designed solely against Y2K and would not be affected by stoppages to Iraqi supply, Sullivan said.
Last week the U.S. government said it was prepared to sell crude oil from its enormous Strategic Petroleum Reserve if Y2K problems disrupted supply.
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