In order to build and operate pipelines for the transportation of hydrocarbons, an individual or entity must obtain an administrative concession issued by the Hydrocarbons Superintendency (Superintendencia de Hidrocarburos del Sistema de Regulación Sectorial).
Those interested in obtaining a concession for the construction and operation of pipelines, stations and plants must declare the dimensions and characteristics of the pipelines. The superintendency will grant the concession upon completion of the execution deadlines and adherence to environmental, economic and technical regulations. The concession cannot exceed 40 years.
Once a concession is granted, a concessionaire may not:
- participate in other concessions for the distribution of natural gas by pipeline;
- buy or sell natural gas; or
- participate in electricity generation, unless the projects and isolated operations are not financially or economically viable without the vertical integration.
The transportation of hydrocarbons through pipelines is regulated by the principle of free access. Consequently, everyone has the right to access contract transportation services provided there is sufficient capacity.
Tariffs for the transportation of hydrocarbons and their byproducts through pipelines must be approved by the superintendency. This assures that the cost for consumers will be as low as possible, and allows the concessionaire sufficient income to (i) cover all operational costs, taxes (excluding tax for remittance of profits abroad) and depreciation, and (ii) obtain reasonable rate of return.
For further information on this topic please contact Ricardo Indacochea at Indacochea & Asociados, Abogados by telephone (+591 353 5356) or by fax (+591 358 1200) or by e-mail ([email protected]).