If a regulated entity undertakes an MSO activity in relation to an MSO product (broadly, if the entity refines or imports certain fuels), the entity may become subject to the minimum stockholding obligation. This is an obligation for the entity to hold a minimum quantity of stocks of the MSO product.

If the entity has an Australian controlling corporation, that corporation must also ensure that the entity meets the minimum stockholding obligation.

The Secretary will trigger the obligation if the entity's activity in relation to the product exceeds a threshold prescribed by the rules.

Once triggered, the entity generally continues to be subject to the obligation until the Secretary is satisfied that it has ceased to undertake all MSO activities in relation to the product.

An entity that undertakes an MSO activity in relation to more than one MSO product may be subject to the minimum stockholding obligation for each product.

The rules may prescribe cases where an entity is exempt from the obligation. The requirement to meet the obligation may also be suspended in some circumstances.

The Secretary notifies entities from time to time of the quantity of stocks of the MSO product they are required to hold. The Secretary determines the quantity in accordance with the rules.

The rules in turn must provide for quantities to be determined by reference to a target number of days decided by the Minister. In deciding the target, the Minister must have regard to the emergency reserve commitment within the meaning of Article 2 of the International Energy Agreement (among other matters). Entities must advise the Secretary in relation to their quantity, and may apply to the Secretary for their quantity to be temporarily reduced.

An entity will be treated as holding stocks of an MSO product in defined circumstances. Generally, stocks must be in Australia, but entities do not necessarily need to own or have direct custody of them.

A range of enforcement mechanisms are available to the Secretary if entities do not meet the obligation, including civil penalties and injunctions.