Government Changes Tariffs for Transportation of Hydrocarbons

The transportation of hydrocarbons is a public service and an important link in the commercialization chain of petroleum and natural gas derivatives. Therefore, a rational and prudent cost must be guaranteed for the operation of this service.

The transportation of hydrocarbons through pipelines is subject to the Hydrocarbons Law 1689 (April 30 1996), Sectoral Regulatory System Law 1600 (October 20 1994) and the applicable regulations.

In March 16 2001 the government amended Article 93 of the Regulation of Transportation of Hydrocarbons through Pipelines. This amendment changed the established tariffs as of May 2001, which was nominated as the transition period.

During this transition period tariffs were established by calculating the minimum return for every type of pipeline in the country. These tariffs were applied to the concessionaire of the Capitalization Transportation Unit (Transredes SA) as well as to the new transportation concessionaires.

The post-transition period lasts from May 17 2001 until December 31 2019. The Regulation for Transportation of Hydrocarbons by Pipelines establishes that, for the pipeline system, the internal market tariff and the export tariff will apply during this period.

During the transition period, revision of the terms, conditions and transportation tariffs will commence five days after the approval of the Regulation of Transportation of Hydrocarbons by Pipelines and will end seven days before becoming effective. The superintendency must publish the new tariffs in a national newspaper at least six days before they become effective.

Once the transition period ends the terms, conditions and transportation tariffs will be revised by the superintendency every four years, as will the efforts of the concessionaire in increasing its operative efficiency every year.

Finally, the tariffs will be determined according to the principles established in the Hydrocarbons Law and in addition:

• there must be equality for the concessionaire and the shipper;

• under a rational and prudent administration, concessionaires must demonstrate to the superintendency that the investments and estimated operation costs reflect the competitive conditions of a free market;

• the concessionaires may not charge higher tariffs than those provided by the superintendency; and

• the superintendency will decide the amount and variation of the tariffs on grounds of the area, duration of contract, type of service or any other reasonable ground.

For further information on this topic please contact Ricardo Indacochea at Indacochea & Asociados, Abogados by telephone (+591 3 535 356) or by fax (+591 3 581 200) or by e-mail ([email protected]).