Secondly, the legislative arrangements for setting up mandatory reserves would present difficulties, Section 5 of the Oil (Conservation and Control)Ordinance 1979 empowers the Governor in Council to regulate the srorage of oil by Order and provides that any contravention of an Order made under that section shall be punishable by a fine not exceeding $50 000 or by a term of imprisonment not exceeding one year or by both. The setting-up of mandatory reserves would be by means of an Order made under section 5.
36
However, in cases where oil importers had inadequate storage capacity, those importers would have to make their own arrange- ments to provide the required capacity in the absence of any industry-wide arrangement. Some importers would have to be exempted from the provisions of the Order temporarily to allow a reasonable period of time for compliance. For this purpose, the most likely arrangement would be for the Order to give discretion to the Director of Oil Supplies to grant temporary exemption from the effects of the Order. However, legal advice has been given that if the power of exemption to be given to the Director of Oil Supplies was to be unfettered, it is probable that the power would be regarded as unlawful by the courts. A further problem would arise with regard to penalties for infringement. Imprisonment of some oil company executive deemed responsible for the failure to keep up the reserve might well be considered an inappropriate course of action. On the other hand, the level of fines provided in the Ordinance when set against the background of the oil companies' turnover could not be considered a realistic sanction.
37
Thirdly, all the major oil companies together with the Hongkong Electricity Company, China Light and Power and the Hongkong and China Gas Company are opposed to mandatory reserves. This opposition would obviously make implementation very difficult. And the fact that the power companies who would be the bodies most seriously affected by a drop in oil supply, did not favour mandatory reserves was considered a telling point against them.
38
The overall view taken was that, in many ways the present' arrangements for oil product reserves are working satisfactorily through contractual agreements between the oil importers and major purchasers such as the power companies and through the oil importers' own practice of keeping a certain amount of working reserve. No benefits and certain disadvantages, as set out in paragraphs 34 to 37 above, were considered likely to result from making the reserves mandatory. What was required was a degree of formalisation of existing practices, with Government taking a greater interest and playing a more active part than heretofore in the setting-up and maintenance of reserves.
CONFIDENTIAL #
No comments yet.
Private notes are available after approval.