Economic Environment

The economy of MERO ČR, a. s. is affected by the company’s main purpose of business activity, i.e. transport and storage of crude oil, which also determines the basic economic characteristics of the company:

• extensive need of fixed assets
• monopolistic position of exclusive transporter of crude oil into the Czech Republic
• the biggest conservator of the emergency crude oil reserves in the Czech Republic

In the area of crude oil transport two natural monopolies collide – the monopoly of the transporter, i.e. MERO ČR, a. s., and the monopoly of the processor, i.e. refineries. Crude oil is supplied to two entities within the refinery-petrochemical holding company Unipetrol. The bigger entity, Česká rafinérská a. s., owns refineries in Litvínov and Kralupy nad Vltavou and the smaller one, Paramo a. s., operates a refinery in Pardubice. The Conservator Contract with the Czech Republic – the State Material Reserves Administration – has been concluded for 30 years and leaves scope to the parties hereto to meet the economic parameters of the investment. One of the conditions for the Czech Republic joining the European Union was to increase storage capacity of the emergency crude oil reserves. Pursuant to Act No. 189/1999 Sb., to provide for emergency crude oil reserves, the required level should have been attained by November 1, 2005. Thanks to further increases in storage capacity of the Central Crude Oil Tank Farm (CTR) Nelahozeves, the obligations of the Czech Republic in respect of the European Union were met at the required level. Extension of The Central Crude Oil Tank Farm Nelahozeves is being financed by its own funds with MERO ČR, a. s. being the direct investor thereof.