Domestic market overview
What is the extent of oil and gas production in your jurisdiction?
Compared to natural gas production, oil production in the Netherlands is relatively modest. Nevertheless, the Schoonebeek field near the German border is the largest onshore oil field in north west Europe. Production by Nederlandse Aardolie Maatschappij (NAM) started in the late 1940s and continued until 1996. In 2011 NAM restarted production in Schoonebeek using new techniques. Estimated production ranges between 100 and 120 million barrels of oil in the next 25 years.
In 2015 1.7 million cubic metres of oil was produced, of which 0.4 million cubic metres was produced onshore and 1.3 million cubic metres was produced offshore.
On January 1 2016 there were 48 proven oil reserves, 12 of which (10 offshore and two onshore) are in production. Activities have been suspended in 12 reserves and 20 reserves are awaiting development. In the next four years, four fields are expected to commence production.
Following the 1959 discovery of the Groningen field in the north of the Netherlands – ranking among the 10 largest gas reservoirs in the world – the Netherlands has grown into one of the major gas-producing countries in Europe. Broadly speaking, 29% of all European natural gas reserves are located in the Netherlands, accounting at the end of 2012 for 0.6% of the global natural gas reserves.
A production licence for the Groningen field was granted in 1963 to NAM – a 50-50 joint venture of Shell and ExxonMobil. In this partnership, the state (via Energie Beheer Nederland BV (EBN)) has a 40% financial share and NAM has a 60% share, although the voting rights are divided equally.
As of January 1 2016 the total natural gas reserves were assessed at 891 billion cubic metres (bcm). Of that total, 665 bcm are attributable to the Groningen reservoir, 109 bcm to small onshore fields and 117 bcm to other onshore and offshore reservoirs.
In 2015 the gross natural gas production from the Dutch gas fields amounted to 49.7 bcm. Of that total, 28.1 bcm was produced by Groningen, 14.0 bcm was produced offshore and 7.5 bcm was produced by small onshore fields. This reflects a decrease of 24.75 bcm compared to 2014.
As of January 1 2016, 477 reservoirs have been discovered, 253 of which are in production and four of which are being used as storage facilities. Production from 108 fields has not yet begun, while 110 fields have been closed temporarily. Further, 33 fields are expected to begin production within five years (2016-2020). It is uncertain whether a further 77 reservoirs will be developed.
How does domestic energy consumption break down with respect to oil and gas, as well as imports and exports?
The total supply of crude oil in the Netherlands increased from 49.8 billion kilograms (kg) in 2014 to 52.8 billion kg in 2015. The total export of crude oil from the Netherlands was 42.7 billion kg in 2014, with a slight increase to 43.7 billion kg in 2015. In 2015 approximately 52.2 billion kg of crude oil was imported for domestic consumption.
The total amount of natural gas used in the Netherlands was 38.1 bcm in 2014, with a slight increase to 38.2 bcm in 2015. The total export of natural gas decreased from 55.1 bcm in 2014 to 47.1 bcm in 2015. The total import of natural gas (gaseous) in the Netherlands increased from 26.4 bcm in 2014 to 33.6 bcm in 2015. In 2015 approximately 2.3 bcm of liquefied natural gas (LNG) was imported and a total of 1.2 bcm LNG was exported.
What are the current trends and future prospects for oil and gas supply and demand in your jurisdiction, and what policies has the government adopted to address these?
Earthquakes in Groningen have continued the debate on further restrictions of natural gas production in the Groningen field. In addition to lowering the production ceilings, the minister of economic affairs announced a plan to amend the existing Mining Law to improve safety conditions and increase the role of local authorities when approving production plans.
The shale gas debate has been sidetracked by the minister of economic affairs. In his July 10 2015 letter to the House of Representatives, the minister announced that there will be no commercial exploration and extraction of shale gas for the next five years. The existing licences granted to explore commercial shale gas will not be renewed. According to Cuadrilla, one of the two licence holders, the minister’s motivation not to renew the licences does not comply with the Mining Act. Cuadrilla thus appealed against the minister’s decision. A court hearing took place on October 12 2016.
Next to these developments, increased attention is being paid to the energy transition from conventional energy sources to renewable and more sustainable energy sources. While gas is considered a transition fuel that will be phased out gradually, the reality is that it will be the most important energy source for at least the next 20 years.
What are the primary laws and regulations governing the oil and gas industry in your jurisdiction?
The Mining Act, effective as of January 1 2003, forms the legal basis for exploration and production activities relating to minerals in the Netherlands (including the Dutch part of the continental shelf). The Mining Act is complemented by the Mining Decree and the Mining Regulation.
Specific rules for the midstream and downstream gas markets have been set out in the Gas Act (since 2000). Implementing EU Regulation 2009/73, the Gas Act provides rules for the storage (including of LNG), transmission, distribution and supply of gas.
Specific rules implementing EU Directive 2009/119/EC on the obligation of EU member states to maintain a minimum stock of crude oil or petroleum products have been set out in the Oil Product Stockpiling Act 2012. This act requires the Netherlands to maintain stocks (the ‘statutory stock’) of crude oil or crude oil products corresponding to at least 90 days of average daily net imports or 61 days of average daily inland consumption, whichever is greater (normally the former). These stocks must be maintained in the Netherlands or an EU member state by the state-owned National Petroleum Stockpiling Agency (around 80%) and relevant market participants.
In addition, the oil and gas industry must adhere to environmental and nature conservation regulations, as well as safety and security regulations set out by the Dutch government.
The European Union’s consecutive energy packages have been transposed into national legislation – in particular, through the Gas Act. EU Regulation 1227/2011 on energy market integrity and transparency, which aims to counter insider trading and market manipulation and increase transparency in the wholesale markets for electricity and natural gas, required legislative action in the Netherlands. The relevant law, amending the Electricity Act 1998, the Gas Act, the Financial Supervision Act, the Economic Offences Act and the Code of Criminal Procedure, entered into force on July 26 2013.
The Netherlands is a party to the Energy Charter Treaty 1994, which focuses on, among other things:
- the promotion and protection of foreign energy investments based on the more favourable of national treatment or most-favoured nation clauses;
- free trade in energy materials, products and energy-related equipment;
- freedom of energy transit, including through pipelines; and
- dispute resolution mechanisms for intra-state and investor-state disputes.
The Netherlands is party to over 100 bilateral investment treaties. Alongside the equally extensive tax treaty network, this has significantly contributed to the attractiveness of the Netherlands as a country through which multinationals can structure their foreign investments.
What government bodies are charged with regulating the oil and gas industry and what are the extent of their powers?
The Mining Act gives principal regulatory powers in upstream oil and gas, apart from environment and planning in general, to the minister of economic affairs and the State Supervision of Mines (SSM). The SSM falls under the competence of the minister of economic affairs.
Two statutorily established advisory bodies – the Mining Council and the Technical Committee on Soil Movement (TCB) – complete the main decision-making, supervisory, enforcement and advisory bodies in upstream oil and gas.
Minister of economic affairs
The minister of economic affairs has the power to make bind decisions, including:
- issuing, revoking and changing Mining Act licences;
- approving mandatory production plans and other approvals; and
- administrative enforcement of the Mining Act, subordinate legislation and licence conditions.
Provisions for small fields in the Gas Act are also administered by the minister.
The SSM supervises and reports on compliance with the Mining Act, subordinate legislation and licence conditions. It also carries out operational inspections of prospecting, drilling, production and storage activities, with a view to ensure well integrity and health, safety and environmental aspects to the extent that these are subject to Mining Act regulations. The SSM must report annually to the minister of economic affairs on its activities and make recommendations on how to increase its efficiency and expediency. The SSM’s annual reports are publicly available.
If solicited, the Mining Council, a non-departmental advisory body, will advise the minister of economic affairs on the exercise of statutory powers. The minister must request the Mining Council’s advice on the issuance or revocation of licences.
Due to concerns over recurring cases of soil movement as a result of oil and gas exploration and production – notably in the northern province of Groningen – the Mining Act 2003 established the TCB. It has advisory tasks with regard to both the minister of economic affairs and citizens.
The TCB advises the minister, at his or her request, on exercising the powers set out in the Mining Act, focusing on any soil movement-related consequences that may occur because of a decision.
In addition, the TCB advises the minister on the soil movement paragraph which, if the initiative involves onshore production, must be included in the production plan submitted by the production licence holder for approval by the minister in advance of production.
Exploration and production
Who holds the rights to oil and gas reserves in your jurisdiction?
Minerals under the surface of the Netherlands (including the continental shelf) are owned by the Dutch state. Ownership of the minerals is transferred to the licence holder(s) once they have been produced under a production licence issued by the minister of economic affairs. A production licence will be granted if the minerals within the area for which the licence applies are deemed economically producible. The licence will specify the validity period and the applicable licence area. Before granting a production licence, an exploration licence is required. The holder of an exploration licence that demonstrates the commerciality of an oil or gas reservoir has priority to apply for a production licence.
Is there a distinction between surface and subsurface rights?
Please see the previous question with regard to the ownership of (sub-surface) minerals. According to the Mining Act, landowners (rightful claimants) must grant the holder of an exploration licence or storage licence (in accordance with the rules governing exploration and storage activities) access to their land, as long as these activities take place at a depth of more than 100 metres beneath the surface. In exchange, landowners have the right to compensation for damages caused by these activities.
What rules and procedures govern the grant of rights for exploration and production purposes (eg, through licences, leases, concessions, service contracts, production sharing agreements)?
The existing Mining Act introduced a uniform licensing regime for onshore and offshore licensing. The act distinguishes licences for various onshore and offshore activities, including:
- exploration of minerals (including hydrocarbons) and geothermal energy;
- production of minerals (including hydrocarbons) and geothermal energy;
- underground storage;
- underground carbon dioxide storage suitability appraisals; and
- underground carbon dioxide storage.
The Mining Act distinguishes between exploration licences and production licences. The ‘exploration of minerals’ is defined to include drilling. Mere prospection requires only prior notification and the submission of certain information to the State Supervision of Mines (SSM); however, separate consent or licences may be required from the minister of economic affairs (in concert with the minister of infrastructure and the environment or the minister of defence, as the case may be) in specific cases relating to shipping safety or military restrictions. Ex ante regulation of prospecting is achieved through the Mining Decree and the Mining Regulation.
Applications or exploration and production licences must be filed with the minister of economic affairs. The Mining Regulation details the information that must be submitted. The application must state the applicant’s registration number with the Dutch Trade Register or a similar registration in another EU member state, 36 of which imply that Mining Act licences can be obtained only by companies with a registered business in the European Union. Once a complete application has been filed, the minister of economic affairs must make a decision within six months. This term may be extended once for a further six months. The initial six-month term is extended by operation of law to allow for competing application procedures as described below.
What criteria are considered in awarding exploration and production rights (eg, are there any restrictions on the participation of foreign investors/companies)?
Applications or exploration and production licences must be filed with the minister of economic affairs. The Mining Regulation details the information that must be submitted.
The application must state the applicant’s registration number with the Dutch Trade Register or a similar registration in another EU member state, implying that Mining Act licences can be obtained only by companies with a registered business in the European Union (that said, a company can be a subsidiary of a non-EU based parent or group of companies).
Are there any special legal provisions applicable to joint ventures?
Licences can be held by more than one entity. All entities holding the licence are considered holders, irrespective of their percentage interests, which are not revealed in the licence. If multiple entities apply for a licence, the application must appoint an operator. The replacement of an operator following the grant of the licence is subject to prior written consent from the minister of economic affairs. The operator or the entity that acted as the operator immediately before the expiration of the licence is responsible for compliance with the Mining Act and subordinate laws.
A holder or co-holder can transfer a licence or its share in a licence to a third party, subject to the minister’s consent. The same grounds for refusal apply as at the initial application.
A change of control in a licence holder, notably following a share transaction, is not subject to the minister’s consent.
Can exploration and production rights be transferred to third parties?
Licence transfers require the prior written approval of the minister of economic affairs. The Mining Act does not require such consent in the event of an indirect transfer through a change of control of the licence holder. However, the minister may withdraw a licence under certain circumstances (eg, where incorrect information was provided in the application or the licensee is in default under its licensing obligations).
In the event that an operator no longer qualifies (regarding its financial or technical capabilities), the minister may designate another operator. Therefore, the transfer of a licence interest via a change of control in the participating entity is often notified to the minister – in particular, in the case of an operated interest. The transfer of a licence interest may also require accession to cooperate with Energie Beheer Nederland BV (EBN).
The disposal of a licence interest is subject to the fulfilment of decommissioning and abandonment obligations. These obligations rest with the last operator and last co-holders of the licence.
Is hydraulic fracturing (‘fracking’) permitted in your jurisdiction?
Fracking is permitted in the Netherlands under extremely strict conditions and only if safety is guaranteed. Fracking activities are inserted in the extraction plan. Therefore, no separate consent procedure is needed.
However, the general rules set out under the Mining Regulation, the General Mining Industry (Environmental Rules) Decree and the Working Conditions Decree apply to fracking activities. More specifically, these general rules require the submission of a safety and health document. This document contains a risk analysis which is based solely on the fracking activities in a specific location. According to the minister, safety aspects are adequately regulated by safety and health documents.
In accordance with the amendment bill to the Mining Act (which is still under debate by the Senate), extraction plans must focus in more detail on soil movement in relation to the use of stimulation techniques such as fracking. In addition, extraction plans must address risks for local residents, nearby buildings and local infrastructure. The minister of economic affairs must consent to the extraction plan.
Fracking techniques were used seven times by the Nederlandse Aardolie Maatschappij (NAM) between 2012 and 2014. The locations of the fracking and the techniques used (together with the chemical components) are on NAM’s website.
In a March 1 2016 letter, the minister of economic affairs presented an SSM inquiry to Parliament regarding the use of fracking and its environmental consequences. The SSM concluded that, to its knowledge, fracking has no detrimental impact on living creatures or the environment.
However, shale gas exploration and production activities using fracking techniques are under a moratorium until 2020.
Transport and storage
What is the general legal framework governing the transportation and storage of oil and gas resources in your jurisdiction?
Access to upstream production pipelines that are used for the transportation of gas or oil to a processing plant, storage facility or landing facility is not regulated (ie, negotiated access applies). Pursuant to the Gas Act, only general competition (antitrust) law applies to access to gas production pipelines. With respect to oil, no reference is made to competition law.
A licence from the minister of economic affairs is required to lay production pipelines; the application requirements are stipulated in the Mining Act, the Mining Decree and the Mining Regulation.
Works executed for the storage, exploration and production of minerals are deemed public works and fall within the scope of the Public Works Act, which provides for the removal of impediments in private law and gives the court the power to impose compulsory land access. Pursuant to the Gas Act, the same applies to gas transmission and gas distribution networks developed by the designated network operator. For other pipelines, parties may apply for a ministerial designation as a public work so that the envisaged pipeline fall within the scope of the Public Works Act.
How is cross-border transportation of oil and gas resources regulated?
The existing downstream networks in the Netherlands are integrated and interconnected with upstream production pipelines, as well as foreign transmission networks in Germany, Belgium and the United Kingdom.
Network operators, gas storage companies and liquefied natural gas (LNG) companies must provide system users with all relevant information required for safe and efficient transportation or storage. Network operators also have the statutory task to:
- connect their network with other networks; and
- provide information about connections between networks, the use of the networks and the allocation of transportation capacities.
Network operators, gas storage companies and LNG companies must refrain from any form of discrimination among system users.
Are there specific provisions governing marine and ground transportation of oil and gas resources?
Marine and ground transportation of oil and gas are governed by specific provisions, which emphasise public safety and the potential risk of major accidents (eg, the Public Safety (Establishments) Decree, the Public Safety (Establishments) Regulation, the Major Accidents (Risks) Decree 2015 (Brzo) and the Act on Transport of Dangerous Substances).
Construction and infrastructure
How are the construction and operation of pipelines, storage facilities and related infrastructure regulated?
With regard to the construction of pipelines, storage facilities (including LNG) and related infrastructure, construction permits and permits under the Zoning Act and the Environmental Management Act are required. Further, the provisions on the construction of pipelines set out in the Mining Regulation must be followed.
What rules govern third-party access to pipelines and related infrastructure?
Access to oil and gas transportation pipelines and associated infrastructure is organised purely by access agreements.
Other than general competition law, no regulated third-party access regime applies to oil and natural gas transportation pipelines and gas storage. As a result, only the abuse of a (joint) dominant position and foreclosure behaviour may be penalised under Dutch or EU competition law.
Trading and distribution
How are oil and gas resources traded in your jurisdiction and what (if any) regulations and procedures apply to oil and gas sales, distribution and marketing activities, both nationally and internationally?
Gas trading is completely liberalised. The Title Transfer Facility (TTF) is a virtual market place on which gas on the Dutch network can be traded. There are different gas exchanges active on the TTF.
Pursuant to the Gas Act, the exchanges offering spot gas trading (day ahead and intra-day) are subject the Authority for Consumers and Markets’ supervision. Exchanges for derivatives fall under the Financial Markets Authority’s supervision, as derivatives are considered ‘financial products’ within the meaning set out in the EU Markets in Financial Instruments Directive. Until 2011 only two exchanges had been designated by the minister of economic affairs as gas exchanges: APX Gas NL BV (spot) and ENDEX NV. In 2009 the parties merged into APX-ENDEX. In 2012 Intercontinental Exchange Inc acquired the gas spot and future activities of APX-ENDEX. In 2011 the European Energy Exchange AG obtained a designation for spot trades. In October 2012 Paris-based Powernext SA was awarded a ministerial designation as an exchange for spot, derivatives, spread products and over-the-counter clearing.
Oil trading in the Netherlands is fully liberalised. Other than general competition law, no regulated third-party access regime applies to oil and natural gas transport pipelines and gas storage. Any abuses of a (joint) dominant position and foreclosure are punishable under Dutch and European competition law.
Is oil and gas pricing regulated in your jurisdiction?
The Gas Act contains the statutory obligation for GasTerra to purchase gas produced from small fields at a market-conforming price when gas is offered to it, except where the minister of economic affairs has released GasTerra from this obligation for economic and financial reasons.
While no rules determine the market-conforming price, GasTerra has applied a ‘net-back’ pricing system for many years. The net-back system basically means that small field producers are paid a price (the normative purchase price) linked to the average sale price realised by GasTerra’s in all the market sectors in which it trades. The purchase price is indexed to heavy fuel oil (reflecting pricing in the power and heavy industries market sectors) and gas oil prices (reflecting pricing in the household and small and medium-sized enterprise market) with the indexes regularly updated. With the growing importance and liquidity of spot markets, spot prices – notably at the TTF and the UK National Balancing Point – have now been included the pricing formula. Pricing will differ in the various contracts contingent on, among other things, carbon dioxide content (calorific value) and field load.
Occupational health and safety and labour issues
Health and safety
What health and safety regulations and procedures apply to oil and gas operations (upstream, midstream and downstream)?
The Dutch Working Conditions Decree sets out a wide range of specific occupational health and safety rules which employers must follow. Most of the EU directives relating to occupational safety and health, including EU Directive 2013/30/EC on the safety of offshore oil and gas operations have been implemented in this decree. The decree, for example, stipulates that employers in the offshore oil and gas industry must prevent and mitigate the impact of major accident hazards through the implementation of a systematic and effective approach to risk management.
Are there any labour law provisions with specific relevance to the oil and gas industry (eg, with regard to use of native and foreign personnel)?
The Working Hours Decree contains a number of specific regulations that apply to the mining industry and which replace the corresponding regulations in the Working Hours Act.
Dutch law contains no specific rules on the use of native and foreign personnel in the oil and gas industry. The general rules on employment apply. For example, an employer that wants to employ third-country nationals in the Netherlands, including in the Dutch territorial waters, must obtain a work permit for such employees. These are issued pursuant to the Foreign Nationals Employment Act.
What is the state of collective bargaining/organised labour in your jurisdiction’s oil and gas industry?
Although no statutory obligation exists, employers often enter into collective bargaining agreements voluntarily in order to influence labour conditions and costs and prevent labour conflicts. The Ministry of Social Affairs can declare certain provisions within a collective bargaining agreement generally binding on employees or employment agreements in a certain sector. This means that all employers which fall under the scope of the agreement must observe and apply the generally binding provisions, regardless of whether they are a party to the agreement. A collective bargaining agreement can be declared generally binding for a maximum of two years. No mandatory collective bargaining agreement is in place for the oil and gas industry.
What preliminary environmental authorisations are required before commencing oil and gas-related activities?
As a rule, the erection and operation of mining installations requires – in addition to adherence to the regulations on exploration and/or production licensing – an environmental permit in accordance with the Environmental Permitting (General Provisions) Act. The act applies to all Dutch territory, including the seabed extending 12 nautical miles from the coastline. Where the Environmental Permitting Act does not apply (notably on the Dutch part of the continental shelf), an environmental permit must be obtained in accordance with the Mining Act. The minister is the competent authority to issue permits in either case. An environmental impact assessment can be part of environmental permitting in designated cases.
Mobile installations, except for those servicing a production location, do not require an environmental permit but may be used only following notification and submission of certain information to the minister of economic affairs. The erection and operation of mobile installations (regardless of whether an environmental permit is required) are subject to general rules laid down in the General Mining Industry (Environmental Rules) Decree, promulgated under the Mining Act.
Nature reserve protection
Initiatives in protected nature reserves, designated under the Nature Conservation Act (following the EU Birds and Habitat Directives), require a Nature Conservation Act permit. A recently adopted act to extend the scope of the Nature Conservation Act to the exclusive economic zone entered into force on January 1 2014.
Onshore initiatives that are not provided for in existing zoning plans will require separate zoning approval.
In June 2014 a new environment and planning bill was proposed to the House of Representatives, providing for a comprehensive set of laws relating to the environment and planning. The new bill will also affect environmental aspects of offshore mining activities and replace specific provisions in the Mining Act. The bill is expected to enter into force in 2019.
What environmental protection requirements apply to the operation of oil and gas facilities?
Other additional permits that may be required in the context of oil and gas exploration and production activities include building permits, planning consents, water discharge and water injection permits.
The amended Public Safety (Establishments) Regulation now applies to exploration locations for oil and natural gas (mining facilities). In short, this means that individuals and groups must be guaranteed protection against accidents associated with hazardous substances in a certain radius of the mining facility.
What are the consequences of failure to adhere to the relevant environmental regulations and to what extent can operators be held liable for environmental damage?
In case of non-compliance, the competent authority is entitled to impose penalty payments and take administrative action (the cost thereof can be recovered from the infringer). In addition, environmental permits may be withdrawn and criminal fines may be imposed.
EU Directive 2013/30/EC
The House of Representatives passed a bill to amend, among other things, the Mining Act in order to implement EU Directive 2013/30/EC on safety of offshore oil and gas operations and amending Directive 2004/35/EC on April 28 2015, together with four amendments. These amendments focus on fundamentals such as the reversal of the burden of proof with regard to mining damage and grounds to refuse exploration and production licence applications for mining activities. The amendment bill is still being debated by the Senate.
Taxes and royalties
What taxes (direct and indirect) and/or royalties apply to oil and gas activities in your jurisdiction (including upstream, midstream and downstream activities)?
Apart from corporate income tax (which is set at 25% of taxable profits exceeding €200,000), the state charges certain taxes directly to the licence holder, such as:
- surface duties (offshore exploration licence or production licence);
- royalties relating to the amount of natural gas produced (production licence); and
- state profit share (SPS).
SPS is levied at a rate of 50% from the holder or co-holders of a production licence on profits that can be directly and indirectly attributed to the extraction of hydrocarbons (the ring-fence). The allocation principles have been established in practice and case law. SPS is calculated in a similar fashion to corporate income tax, but with most expenses ‘uplifted’ by an additional 10%. To prevent corporate income tax and SPS from accumulating, a notionally calculated amount (generally referred to as the ‘creditable amount’) can be credited against SPS.
Further, the state derives value through:
- 40% participation via its 100% subsidiary Energie Beheer Nederland BV (EBN) in produced units;
- 50% participation in GasTerra; and
- 100% participation via its subsidiary GTS, the Dutch national transmission operator.
Finally, royalties apply to the amount of natural gas produced at a rate based on the turnover. The turnover is the combination of production volume (excluding processing and transportation volumes used during exploration or production) and unit sale price. Turnover attributable to EBN’s entitlement to 40% of produced units is excluded from royalty taxed turnover.
Imports and exports
What taxes and duties apply to oil and gas imports and exports?
In addition to regulations regarding the duty on mineral oils, the Oil Stockpiling Act 2012 imposes an obligation to maintain compulsory stocks of light fuel oil, gasoil, heavy fuel oil and liquefied petrol gas. The obligation applies to every licensee of a tax warehouse for mineral oils which has discharged an amount exceeding 100,000 tonnes of oil products (aggregate) in a year; the stockpiling obligation amounts to 12% of such excess.
Under the Oil Stockpiling Act 2012, products are deemed part of the compulsory stockpiling obligation, provided that they are located within an EU member state. If this stock is not located in the Netherlands, a bilateral treaty must be in place between the Netherlands and the respective state. Under the act, in order for products to be attributed to the compulsory stock, the entity under the obligation must have legal title to the stock. However, companies can cover their compulsory stock obligations by contracts – referred to as ‘tickets’ – issued by the owner of surplus stock. The tickets stipulate that certain volumes of oil product will be held in stock by the owner, which is obliged to physically deliver these products against the existing market rates in certain crisis situations at the request of the ticket holder.
How is the decommissioning of oil and gas facilities regulated?
The Mining Act prescribes that mining installations that are no longer in use must be removed, including scrap and other materials at or immediately near such installations. The minister of economic affairs may limit the obligation to a certain depth beneath the soil or surface water, and may set a timeframe within which the obligation must be fulfilled. The minister’s power to determine a time limit can be used to allow assets that are no longer used for production to be re-established as part of an existing transportation system, which would then obviate the need for removal (Explanatory Memorandum to Mining Act Bill, House of Representatives, 1998–1999, 26 219, No 3, p 27). The removal obligation rests on the licence holder or, if the licence is held by more than one company, the operator. If the licence has expired, the obligation falls on the entity that last held the licence or, if it was held by more than one licensee, the operator appointed most recently before the expiry.
With respect to cables and pipelines situated on the Dutch part of the continental shelf, the decommissioning regime is slightly different in that the removal obligation does not exist by force of law, but applies if and to the extent that the minister of economic affairs has ordered the removal. The obligation rests on the cable or pipeline operator or last known operator.
The minister of economic affairs may decide that financial security, in an amount determined by the minister, must be provided to cover costs of administrative enforcement measures to be taken on the failure of the licensee or operator to fulfil its removal obligations. Regulations are silent as to when the minister of economic affairs can demand financial security. However, the application for an exploration or production licence may be denied if the minister is not satisfied that the applicant will be able to provide security if so requested in the future.
How are oil and gas disputes typically resolved in your jurisdiction?
Dispute resolution in upstream affairs is mostly subject to contractual dispute resolution arrangements (arbitration). General administrative law applies to conflicts with the minister of economic affairs. Any party in a dispute with a network operator or a liquefied natural gas company with respect to the fulfilment of its statutory duties under the Gas Act may file a complaint with the Authority for Consumers and Markets. This is without prejudice to any other possible options, including a civil court procedure, the complainant may have.
Under the Gas Act and the General Administrative Act, decisions made by the minister of economic affairs or the regulator under the Gas Act (or any secondary legislation) can be objected by the parties to which the decision is directed or any other parties that are directly and individually affected.
Subsequent decisions by the regulator on the objections can be appealed before the Trade and Industry Appeal Court. In cases of urgency, a request for provisional measures can be filed with the president of the court.
Decisions made by the regulator on the basis of the Competition Act can be challenged before the Rotterdam Tribunal Court and appealed before the Trade and Industry Appeal Court.
What regulations and procedures are in place to combat bribery, fraud, collusion and other dishonest practices in the oil and gas sector in your jurisdiction?
The Penal Code has a body of anti-bribery rules targeting corrupt practice in the public and private sector. In addition, the Anti-money Laundering and Financing of Terrorism Act 2008 sets out rules for financial entities when researching clients’ backgrounds and requires that they notify any unusual transactions. That said, these rules do not target the oil and gas sector in particular.
The Penal Code prohibits bribery of public service employees (which is a broader concept than civil servant). Bribery includes the provision of a favour to speed up or otherwise facilitate a decision to which the briber would normally be entitled. Both the briber and the public service employee may be punished.
Equally prohibited is the bribery of persons who are not public service employees. Both the briber and the employee may be punished. For a gift, service or promise to qualify as bribery, the employee must have refrained in bad faith from disclosing the gift to his or her employer.
A person or company accepting a gift, service or promise from an employee will be considered to have breached the anti-bribery rules if that person or company, when the gift was offered by the employee, had reasons to believe that the employee would refrain in bad faith from disclosing the gift, service or promise to his or her employer.
Criminal penalties range from two to four years’ imprisonment (or up to six years’ imprisonment in the case of money laundering and eight years for financing terrorism) or a maximum fine of £82,000 (as of January 1 2016).
In the Netherlands, a legal entity can be criminally prosecuted and condemned for criminal acts of its corporate bodies or employees that are reasonably attributable to it. Criminal anti-bribery fines for legal entities can amount to £820,000 (as of January 1 2016). However, an exemption to this maximum exists where the penal court determines that the maximum amount is disproportionate. In such a case, the court can impose a penalty of 10% of the company’s annual turnover based on the turnover realised in the financial year before the judgment or penalty order was issued. In addition to the aforementioned penalties, the penal courts can issue orders to confiscate the proceeds of a crime.