* West's energy body urges Australia to build emergency oil supplies
* IEA says Australia the only member to rely on commercial holdings
* Private holdings of emergency supplies keep it out of coordinated release plans
By James Grubel
CANBERRA, Nov 19 (Reuters) - The West's energy watchdog urged Australia on Monday to build up its emergency oil supplies and stop relying on industry stockpiles, which are too low to meet international commitments due to higher oil imports.
The recommendation, from the International Energy Agency's review of Australia's energy policies released on Monday, would allow the country to join the body's international efforts to coordinate the release of emergency stocks when needed.
As a member of the IEA, adviser to industrialised nations on energy policy, Australia is obliged to keep stockpiles of 90 days of oil supplies. But the reserves are all held by the oil industry, rather than the government, and the stockholdings regularly fall well below the 90-day limit.
"IEA strongly recommends that the Australian government take action to become fully and systematically compliant with its international energy programme stockholding commitments," Executive Director Maria van der Hoeven said, while releasing the Australian energy review in Canberra.
"The establishment of emergency stockholding to meet the minimum commitment would also create the means for Australia to contribute to an IEA collective action with the use of emergency stocks."
Van der Hoeven said Australia was the only IEA member to rely on commercial holdings, which were previously considered sufficient when the country was a net oil exporter or only imported small amounts of oil.
But Australia's increased reliance on oil imports since 2000 meant the stockholdings were no longer adequate to meet the 90-day commitment, the IEA said.
"The IEA estimates that compliance will likely be around 70 days throughout 2012," it said, adding that the figure could improve slightly in 2013 with a short-term increase in domestic production.
The private holdings of Australia's emergency supplies meant the country could not take part in the IEA's coordinated release of stockpiles last year, to help counter the loss of oil production from then strife-torn Libya.
Australian law gives the resources minister the power to impose stockholding requirements on the industry, or specific reporting obligations, in the event of an emergency. Companies report on a monthly basis now.
At the end of 2010, Australia's total oil stocks, held by industry, were 38.1 million barrels, of which 45 percent was unrefined oil, the IEA said. The stocks have fluctuated between 35 million and 45 million barrels over the past five years.
Oil demand in Australia averaged 960,0000 barrels a day in 2010, and has grown by one percent a year on average since 2000, when the country's crude production peaked, the IEA said.
Australian net oil imports, including crude and refined products, were 393,000 barrels a day in 2010, it said, with nearly 330,000 barrels a day of domestic production exported, mainly to South Korea, Thailand and China.
In September the government forecast Australia would produce 23.4 million litres of crude oil and condensate in the year to June 30, 2013, an annual increase of 2.6 percent, and export 19.7 million litres, an increase of 2.5 percent.
At the same time, Australia is forecast to import 28.9 million litres, down 2.2 percent on the year, the Bureau of Resources and Energy Economics said in its September forecasts.
Australia's refining capacity is shrinking in the face of competition from mega refineries in Asia, adding to the problem.
In 2003, ExxonMobil closed its Adelaide refinery at Port Stanvac, while Shell Australia plans to close its Clyde refinery near Sydney and convert it to an import terminal by mid-2013.
In September, Caltex Australia said it would shut its loss-making 124,500 barrel-per-day Kurnell oil refinery in Sydney in late 2014 and convert it into an import terminal. That will leave Australia with five operating refineries.
Resources Minister Martin Ferguson welcomed the IEA's review of Australian energy policies, but made no comment on whether the government would now stockpile its own oil supplies.
A spokeswoman said the recommendation would be considered by the government as it studies future energy policies.