Gas Supplies & Pricing Law

Transcription

1 Article: 1 Definitions Gas Supplies & Pricing Law The following Terms and expressions shall have the meanings set forth below unless otherwise stated herein: - Saudi Aramco: Saudi Arabian Oil Company - The concerned parties: The firm which owns an independent gas network or any other party willing to benefit from this network. - The governed activity by this law: Any or more activities in the following fields: 1- Hydrocarbons Transmission 2- Hydrocarbons Treatment 3- Hydrocarbons Fractionation 4- Hydrocarbons Collection 5- Hydrocarbons Local Distribution 6- Sale or disposal in anyway whatsoever. - Ethane: A gaseous hydrocarbon, containing tow carbons mainly used as petrochemical feedstock or a component of dry gas. The commercial ethane may contain little NGLs or heavy component. - Natural Benzene: Butane and other heaviest natural gas components usually mixed with benzene or used as petrochemical feedstock. - Fractionation: Ethane is fractioned from other natural gas liquids either derived from gas processing or separating plants - to have separate components: Ethane, Propane, Butane, Pentane and heaviest hydrocarbons. - Conversion: Conversion, transfer, selling, assignment or disposal of the license in any way whatsoever or raising rights against it, including the sublicense. The intention or attempt for such conversion is included therein

2 - Licensing: The license to practice the activity under this law and issued accordingly. - Gas refinement: Removal of water, carbon dioxide, sulfur and free liquid hydrocarbons at the plants referred to herein either at gas or refining plants (this may include, in specific conditions, the control units of the condensation points), which is an activity carried out within the production process. - Right of Guarantee: Mortgage of all types whether ownership transfer or not used as guarantee to pay, settle or fulfill any liability. - Natural Gas liquids (NGLs): One or more of the following petrol components: Ethane, Propane, Butane, Pentane and the heaviest hydrocarbons (referred to herein as Pentane and others). - Local Distribution Network: The network receiving the dry gas from the high pressure gas pipelines to reach the consumers. This normally requires installation of piping and low pressure stations and other facilities, bringing the gas to consumer s meters with appropriate pressure. The local distribution networks include supply to any group of consumers in any industrial area or city. - Main Distribution Network: The existing main gas network or any future expansion, including integrated gas transmission network and processing, as well as natural gas liquids transmission and fractionation. - Independent Network: Gas transmission and processing network, as well as natural gas liquids transmission and fractionation, which is un connected with the main gas network. -The Company: Any company established or allowed under the laws of Saudi Arabia to practice the activity in KSA, including any joint venture project

3 - Gas: A mixture of hydrocarbons containing Methane, Ethane, Liquid petrol gas, Pentane, heavier components and some impurities. It usually comes in gaseous condition within the surrounding atmosphere. - Liquid Petrol Gas: Hydrocarbon products of Propane and Butane which is gas derived, sold as separate elements, mixtures, fuel or feedstock. The Liquid Petrol Gas may contain little amount of Butane, heaviest components and normally comes in liquid within the storage conditions. - Dry Gas: Referred to herein as sale gas, mainly composed of Methane but it may contain some Ethane, little amounts of the heaviest hydrocarbons and other components. -The Committee: Supplies and Pricing Committee mentioned in Article Implementing Rules: The implementing rules issued under provision of Article 17 herein. - Supreme Council: The Supreme Council for Petroleum and Mineral Affairs (SPMC). -The Licensee: The holder of license which entitles him to practice any activity under this law. - Connection facilities with the main gas network: The facilities set for connection of any activity under these regulations or production facility preceding such activity with the main gas network. - The Facility: Any facility which holds such activity under this law or intended to be practiced. - The Main consumer: An independent industrial or utility project uses natural gas products, fuel or feedstock, which gets it needs through system directly connected with high pressure gas transmission Network not through local distribution one

4 - Industrial Project: Any licensed industrial project other than the utility ones. - Utility Project: Any power generation or desalinated water production project or both together. - Transmission: Supply of refined dry gas, with high pressure, through big diameter pipelines normally starting at the outlet of the gas refinery at each of gas field and ending at connection with anyone of the main consumer or party that handles the local distribution. -Gas processing: Removal of natural gas liquids from gas containing high percentage of liquids that it has been refined for production of saleable gas at the referenced plants whether by processing gas plants or by fractionation plants that connected to pipelines. - Designated Hydrocarbons: Any gas or liquid hydrocarbon (except the crude oil or condensates) produced in the Kingdom and processed by gas refinery plant. - Natural Gas Liquid Transmission: Supply of the natural gas liquids (NGLs) by pipelines from Gas processing plant, or delivery of one of those liquids from fractionation plant to the enduser or exporting. - The Ministry: The Ministry of Petroleum & Mineral Resources. -The Minister: The Minister of Petroleum & Mineral Resources. Article 2: Licensing the activity under the applicable law 1- The license shall be obtained for practicing the subject activity; including specific hydrocarbons transmission, processing, fractionation, collection, local distribution, sale or disposal. The license application shall be delivered in compliance with the - 4 -

5 procedures of the implementing rules issued by the Supreme Council chairman. The Ministry will review the application and take the necessary action thereof. 2- Upon review of the license application, the Ministry shall consult the Governmental departments concerned with the proposed activity subject to this law. All matters shall be taken into consideration including but not limited to the following: a- Ensure the long term supply of the relevant hydrocarbons. b- Avoid the undesirable duplication in order to achieve the optimal development of gas industry in Saudi Arabia. c- Closeness of the subject activity to the main gas network. Article 3: Ownership and operation of the facility 1- Saudi Aramco will assume the responsibility of collection of designated hydrocarbons going through the main gas network. 2- Saudi Aramco or any other company shall obtain the license according to this law in order to set up and own the facility including the pipelines integrated with the main gas network and a license to operate these facilities if compatible with the sound practices of work. 3- Saudi Aramco or any other company shall obtain the subject license to set up, own and operate any independent network not connected with the main gas network. 4- Saudi Aramco or any other company shall obtain the subject license to set, own and operate any local gas distribution network. Article 4: The right to use the capacity of the network 1- Considering the available capacity and terms of paragraph (2) & (6) of this article, any company, intending to practice the subject activity, may make use of the gas processing and fractionation plants, NGLs transmission networks and facilities as well as the local distribution networks. 2- The Ministry may grant an exclusive right, for a limited term, to use the local distribution network, gas processing or fractionation plants or transmission facility If the Ministry is convinced of its necessity to ensure the economic feasibility and such exclusive right will be in the kingdom s best interest. 3- The Ministry will publicize the tariff for transmission, fractionation and other provisions and conditions pertaining to the main gas network and connection facility in conformity with the implementing rules. 4- The concerned parties shall negotiate about the tariff, provisions and other conditions relevant to the services provided through any pipeline not connected with the gas main network. If the parties don't reach an agreement within the period that has been set up, the ministry may set the tariff and other conditions and terms to provide - 5 -

6 these services in compliance with the implementing rules. The concerned parties should be bound by that. 5- The implementing rules will identify the criteria to set any tariff which may be imposed on a third party in return of making use of any local distribution network. 6- The Ministry may require any owner of the gas processing or fractionation plants, transmission facility or any local distribution network, to increase the capacity of such plant, facility or network. Such capacity extension may be made available to the other companies licensed or applying for a license, providing that such extension and availability are technically and economically feasible for the owner and in the kingdom s best interest. Article 5: Rights of marketing and sale 1- Saudi Aramco will assume all local marketing and sale activities of dry gas, Ethane, NGLs products through the main gas network with the exception of the terms stated in paragraph no ( 2 ) of this article. 2- Any company, other than Saudi Aramco, allowed to make use of the main gas network, may receive or consume at its licensed and owned facilities, the designated hydrocarbons products of their own as parts of the network. The volume of these materials may be modified as agreed on by both parties considering the loss of the designated hydrocarbons portion at the main gas network. 3- Saudi Aramco may sell all designated hydrocarbons which are not consumed or disposed as per paragraph no (2). In such case, Saudi Aramco shall compensate the concerned company based on the following: a. Dry gas, at the fixed rate, after deducting any tariff for transmission through the main gas network. b. Ethane (except Ethane consumed, sold or disposed of within Dry gas) at the fixed rate after deducting any tariff for transmission or any amount against processing or fractionation of Ethane. c. NGLs, based on their local sales fixed prices ( unless the ministry finds out, for the kingdom s best interest, that other prices, to be specified as per paragraph (2/B ) of Article (6), shall be adopted after any amount against transmission, processing or fractionation of NGLs. 4- Any company producing hydrocarbons, that don't go through the gas network, may locally consume or sell or dispose in accordance with the conditions set forth by the Ministry. 5- Saudi Aramco will undertake the exports of all locally produced. NGLs

7 Article 6: Prices of NGLs and Dry Gas: 1- Any company consuming either NGLs or Dry Gas, as permitted by paragraph (2) or (4) of Article (5), will be treated on the basis of the local sales prices of the designated hydrocarbons referred to in paragraphs (2) & (3) herein. 2/a All Natural Petrol Gas and Benzene liquids produced by any company (other than Saudi Aramco) under paragraph (3) of Article (5), will be priced as per the local pricing of designated Hydrocarbons agreed upon by The Supreme Council occasionally. 2/b The Supreme Council, as recommended by the Minister, may exceptionally issue pricings for the items mentioned in paragraph (A) above, not higher than the export price of the products with deduction of the exporting costs and not lower than the local price. 3- All dry gas products of any company will be priced with the local fixed price on delivery to the main consumer or to any company licensed and permitted to manage the local distribution network. Article 7: Quota allocation (Privatization of Gas, Ethane and liquids) 1- The Ministry proceeds with the necessary privatization based on the standards set forth by the committee as follows: on the basis of the estimated demand of each sector of Electricity, petrochemicals, water desalination, oil and other industrial sectors, reflecting the usage of dry gas and NGLs, to achieve the optimum efficiency, added value to the national economy and contribution to increase and diversify the national income sources. 2- The Ministry will allocate quota for the consumers of the designated hydrocarbons as per the plan established by the Supreme Council based on the criteria set forth by the committee. Article 8: The uncompetitive standards conducts/ practices The Ministry shall control the gas sector to reveal any uncompetitive standardsand take the proper action to suspend such kind of practices. Article 9: Technical Services standardization 1- The Ministry shall set the technical standards to organize the design, construction, start up, maintenance and operation of the facilities used for the activity under this law

8 2- The Ministry shall review and update the technical standards referred to in paragraph (1) above, as required to fulfill the best industrial practices. 3- The Ministry shall monitor the compliance of the licensed companies with the subject technical standards and those mentioned in Article (10) and enforce them accordingly. Article 10: Commercial Services Standards The Ministry shall set the following to facilitate the implementation of this law: 1- The accounting procedures and practices to be used by the licensed companies, to ensure possible separation of the subject costs from others and consistent computation. 2- The standards and format of information volume to be submitted by the licensed company to the Ministry. 3- The procedures to be adopted for invoicing and money collection against the services and designated hydrocarbons supplied by Saudi Aramco or other licensed companies. 4- Any obligation, that is related to the services, in particular by any company licensed and authorized to set up local distribution network. Article 11: Licensing conditions and provisions 1- In addition to any binding condition or provision of the license, the licensed company shall make plans to increase the percentage of the Saudi manpower and train them, provide the safety and health care for its staff and public, environmental protection from any adverse effect of the licensed activity according to this law within a reasonable period specified by the Ministry. 2- The company shall provide a copy of all plans respectively as soon as they are finished. 3- The licensed company shall review and update these plans periodically at reasonable intervals as specified by the Ministry..These revised plans shall be submitted to the Ministry as soon as they are finished. 4- In case of violation of these plans implementation, The Ministry shall send a written notice illustrating such violation. If the company fails or declines to take the urgent actions to correct such violation within one month notice, the said company will be obligated to pay penalties as defined by the implementing rules. The Ministry may suspend the activity of the company if such breach jeopardizes the life of the staff and public. Article 12: Licensing fees & Insurance 1- The license applicant shall pay an amount as determined by the implementing rules

9 2- The licensed company shall pay an annual amount as specified by the implementing rules. 3- The licensed company shall have insurance coverage for the third party claims arising out from such activities governed by the subject law. Such insurance shall be for appropriate coverage with insurance company approved by the Ministry. Article 13: Licence Transfer & Assets protection 1- The Ministry's prior consent shall be obtained when transfer of licenses or any of the facilities or other assets utilized in any activity duly licensed or upon the right of guarantee for any license, facility or other assets. 2- The Ministry will define the procedures to apply for such approval necessitated under paragraph (1). Article 14: License modification The Ministry may modify the conditions of any license as defined therein upon a notice to the licensed company and the statements, submitted by the company within a reasonable period specified by the Ministry, will be considered. Article 15: License cancellation The Ministry may cancel any license, in certain cases, within the conditions and terms stated therein. Article 16: Disputes In case of any dispute arising between the Ministry and the licensed companies, or between two or more companies, it shall be amicably settled if possible. Otherwise, such dispute shall be resolved as follows: a. It shall be referred to (Gas Industry's Disputes Settlement Committee) formed by the Supreme Council of at least three members. One of them shall be legal advisor and the other shall be of technical expertise in such disputes. b. The Supreme Council will identify the procedures to be adopted by The Gas Industry's Disputes Settlement Committee. c. The decisions made by the committee may be referred to the Board of Grievances as applicable

10 Article 17: The implementing rules The implementing rules of the subject law will be issued by a decision of the Supreme Council, published in the Gazette and enforced as of its publishing date. Article 18: Supplies & Pricing Committee A committee shall be formed, at the Ministry of Petroleum & Mineral Resources, chaired by the Ministry's representative and members of The Ministries of Finance, Ministry Commerce & Industry and Ministry of Water & Electricity and two persons appointed by the Supreme Council as nominated by the Minister. The said committee shall meet at least four times a year as called by the chairman. The quorum will be at least four members including the chairman. The recommendations will be made with a majority voting. In case of vote s equality, the chairman will have the casting vote. The Committee will be in charge of the following: 1- Study and review the implementing rules for the gas supplies & pricing. 2- Determine the long and short term supplies of gas. 3- Propose the quota criteria and optimal usage of gas as being energy source and feedstock. 4- Propose the gas pricing plans based on the Ministry's recommendations. 5- Review this law and submit the recommendations and proposals to the Minister who will refer them to The Supreme Council for Petroleum and Mineral Affairs (SPMC). 6- Look into the regulatory matters referred by the Minister. The Committee will submit the recommendations and proposals to the Minister who will refer them to The Supreme Council for endorsement and completion of the regulatory procedures. Article 19: This law is to be published in the Gazette and will be in force as of its publishing date