Regulation of natural gas pipeline transportation and storage

Ownership and infrastructure

Describe in general the ownership of natural gas pipeline transportation, and storage infrastructure.

Local gas transportation pipelines and storage facilities are owned by the state. The Egyptian Natural Gas Company (GASCO) oversees the operation and management of these facilities, while the Gas Regulatory Authority (GRA) grants the required licences for carrying out transportation and storage activities. GASCO is also responsible for the maintenance, upgrading and adoption of expansion plans for the National Gas Grid and its facilities.

The Gas Market Activities Law was introduced with the aim of restructuring the gas market by way of gradual liberalisation, and allowing participation of the private sector. It was reported that natural gas distribution licences were issued to several private-sector companies in order to develop and expand the gas grid. As the implementation of market liberalisation takes place, opportunities for third parties to access transportation and storage facilities will be available to attract more investment in the energy sector and limit the government’s monopoly over the market.

Regulatory framework

Describe the statutory and regulatory framework and any relevant authorisations applicable to the construction, ownership, operation and interconnection of natural gas transportation pipelines, and storage.

The Gas Market Activities Law and its executive regulations regulate the activities related to gas transportation and storage. As stated above, the GRA and GASCO (on behalf of the Egyptian Natural Gas Holding Company (EGAS)) are the main authorities overseeing said activities. GASCO is responsible for the operation and management of the gas transportation and storage facilities, while the GRA grants the required licences for carrying out the underlying activities. The licences include the relevant operation conditions of the gas networks and facilities. Additionally, the GRA is responsible for putting in place the operating codes for gas networks. It also sets out the mechanism of calculation of the tariff imposed for the use of gas transportation pipelines.

Land rights

How does a company obtain the land rights to construct a natural gas transportation or storage facility? Is the method for obtaining land rights to construct natural gas distribution network infrastructure broadly similar?

Companies willing to construct gas pipelines or storage facilities must meet certain financial and technical criteria set out by EGAS, which is entrusted with the authority of overseeing said activities. Once these criteria are duly met, as confirmed by EGAS, the Minister of Petroleum and Mineral Resources (MOP) shall grant approval, by virtue of a decree published in the official gazette, on granting land rights to the qualified companies.

Access

How is access to the natural gas transportation system and storage facilities arranged? How are tolls and tariffs established?

The GASCO-run Natural Gas Grid, considered to be the largest transmission pipeline network in the Middle East and Africa, acts as the link between gas producers and consumers. Gas suppliers’ access to the natural gas transportation system is available upon being granted a licence by the GRA.

The Gas Market Activities Law states that the GRA is responsible for outlining the value of the tariffs as well as the operation codes after conferring with the relevant authorities. One of the operators’ responsibilities is to provide third parties access to the transmission networks and storage facilities.

The gas transmission tariff, of US$0.3752 per one million British Thermal Units (mmtu), is based on two things: the capacity charge at the entry and exit points of the grid, and the commodity charge of the quantities of gas at the entry point of the transmission system operator’s (TSO) pipeline. Along with the applied tariff, GASCO issues an invoice to each gas supplier or shipper in respect of its gas transmission. In March 2020, the GRA lowered the fees for gas transmission, shipping, distribution and supply licences. The licence issuance fee for transmission went down from 0.057 mmbtu in 2019 to 0.0440 mmbtu in 2020, shipping from 0.031 mmbtu to 0.024 mmbtu, distribution from 0.023 to 0.016 mmbtu, and supply from 0.008 mmbtu to 0.006 mmbtu. 

Interconnection and expansion

Can customers, other natural gas suppliers or an authority require a pipeline or storage facilities owner or operator to expand its facilities to accommodate new customers? If so, who bears the costs of interconnection or expansion?

Article 25 of the Gas Market Activities Law requires gas TSOs to manage, operate, maintain, develop and integrate the gas transport system when possible. Furthermore, the operator must submit a five-year development plan of the gas transport system to the GRA for its approval.

Although the same requirement is not outlined for storage facilities operators, article 34 of the Law states that the gas storage facilities usage code, which is to be developed by the operator and approved by the GRA, sets out the obligations of the gas storage facilities operator.

Processing

Describe any statutory and regulatory requirements applicable to the processing of natural gas to extract liquids and to prepare it for pipeline transportation.

GASCO is responsible for gas processing activities through the Western Desert Gas Complex (WDGC), the Amerya LPG Recovery Plant and United Gas Derivatives Co (UGDC). In 2000, GASCO initially started the processing of natural gas through WDGC, then EGPC assigned it the Amereya LPG Recovery Plant. In October 2001, GASCO partnered with Eni and BP in the UGDC for the development of a global extraction plant near Port Said. GASCO signed a memorandum of understanding with Enppi and Petrojet to expand the WDGC and increase its capacity to 1.5 bcf/d from 600 mcf/d.

EGAS is responsible for setting out any regulatory requirements and overseeing the processing of gas.

Contracts

Describe the contractual regime for transportation and storage.

The licence granted by the GRA to TSOs, distribution system operators (DSOs), shippers, suppliers or storage facilities operators sets out the rights and obligations of each operator and the performance standards that must be achieved. The usage and tariff codes developed by the GRA also include conditions that must be upheld by the operators or else they risk the suspension or cancellation of their licences.

Further, as provided in GASCO's Transmission Network Code, gas transportation contracts concluded with network owners shall be subject to a number of conditions, including the following: 

  • the tariff charged shall be solely based on the consideration of the GRA; 
  • the terms of the network code, including the tariff charged, shall not be amended on a discriminatory basis;
  • GASCO shall ensure not to communicate any information in relation to operational aspects to the network owner, unless such information is equally available to the network operators as well; and
  • GASCO’s representatives negotiating and approving the gas transportation contracts should not be directly employed by the network owner.