Introduction
Main changes
Implications
Introduction
The Ministry of Mines and Energy is responsible for ensuring the provision and distribution of natural gas in an efficient and stable manner for all inhabitants of the country. Act 142/1994 aims to ensure the availability of an efficient energy supply. Through this act, the Electric Energy Regulatory Commission set the operating rules for the planning and coordination of the national interconnected system and the regulation of the wholesale gas market.
Article 59 of the Law on International Trade of Natural Gas (812/2003) allows the government to impose limits or set up instruments to ensure the domestic supply of gas in compliance with existing contracts. Decree 2687/2008 regulates the export of natural gas in order to guarantee a domestic supply; under this decree, producers and marketers of natural gas may dispose of proved reserves only when the reserve-to-production ratio is greater than seven years.
The ministry recently issued two new decrees(1) introducing several changes to the law regulating the production, marketing and distribution of natural gas in response to serious deficiencies, which culminated in a critical point when gas rationing was declared in September 2009.
Main changes
The main changes are as follows:
- Gas production projects with a capacity in excess of 50 million cubic feet per day will have to be auctioned, either for firm or disrupted production.
- Interruptible contracts will have a limit on the number of interruptions, and in the case of a firm supply becoming available, the decree authorises the termination of such contracts in favour of a fixed-supply agreement.
- Standard contracts to be used for the trade and exploitation of natural gas, which will be issued by the Energy and Gas Regulatory Commission in due course, will be enforced.
- Natural reserve exports will be curtailed, since there have been projections that suggest a shortage of natural gas in the country between 2015 and 2017.
These measures will have several implications.
Once the decree comes into effect, the ministry will have to approve each export application of natural gas, even when the projected amount of reserves will last for more than seven years, and reject any application that it considers to be inconvenient to gas export. However, this provision will not come into force until the ministry issues a new regulation to calculate the relationship between gas production and reserves in the country.
This regulation will organise the secondary market by institutionalising the natural gas spot market.
More pressure will be applied on producers to declare the quantities of natural gas that they can supply.
'Peak time' usage issues will be alleviated with the implementation of certain key measures, such as strategic storage for some types of user.
For further information on this topic please contact Gabriela Mancero Bucheli at Peña Mancero by telephone (+57 (1) 640 1355) or email ([email protected]).
Endnotes