On November 7th, 2019, Resolution No. 722/2019 issued by the National Gas Regulation Entity (in Spanish, Ente Nacional Regulador del Gas and hereinafter, the “Resolution” and “ENARGAS”, as applicable), has been published in the Official Gazette, which approved the rules for natural gas storage (the “Rules”).
The Resolution has been issued within the framework of: (i) Law No. 24,076 (which contains the main rules for natural gas midstream and downstream), and (ii) its regulatory Decree No. 1,738/1998 (the “Regulatory Decree”), which foresee natural gas storage companies as agents of the natural gas industry.
The key takeaways of the Rules are singled out below:
- Scope
The Rules establish the conditions, procedures and requirements that must be complied with by companies willing to own and operate natural gas storage facilities, as well as the requirements that must be met in order to register such facilities under the natural gas storage registry.
Natural gas storage is defined by the Rules in the following terms: “the activity intended to store natural gas in underground or ground level facilities, during a certain period of time, including delivery, storage and further withdrawn, and when applicable, its liquefaction and regasification” and further states that all ancillary activities are comprised therein.
Storage facilities comprised by the Rules are: (i) LNG storage tanks, (ii) CNG and/or in bulk CNG loading and unloading facilities, (iii) LNG regasification and/or liquefaction terminals, (iv) LNG storage “peak shaving” facilities, (v) regasification or liquefaction mobile equipment, (vi) LNG transportation tanks, (vii) underground natural gas storage facilities, and (viii) CNG tanks.
Further, facilities outlined above are also subject to safety regulations and controls that ENARGAS may issue from time to time and must also be operated pursuant to NAG Codes (i.e. applicable local technical codes) and regulations passed by the ENARGAS regarding natural gas storage.
The following facilities are expressly left out from the Rules: (a) facilities aiming to use gas as a fuel for automobile transportation; (b) fuel stations with CNG and/or LNG storage; (c) methane tankers focused on water transportation used to import and export LNG from and towards a storage, regasification or liquefaction facility; (d) hydrocarbon production equipment which run with LNG as fuel, as well as other upstream activities.
The Rules indicate that such facilities must be operated pursuant to the rules, codes and best industry practices, until the ENARGAS issues specific regulation addressing those facilities.
- Authorized entities
Companies may carry out natural gas activities insofar a prior authorization issued by the ENARGAS is in place. Such authorization must be issued by the ENARGAS no later than forty-five (45) business days as of the date on which the application is submitted, thereof.
Companies that currently operate natural gas storage facilities are granted with a sixty (60) business day-term in order to begin the registration procedure.
The Rules allow gas transportation and distribution companies to act as natural gas storage agents, whether by their own or throughout a third party or by an affiliate. A separate balance sheet and accounting procedure is required for that end.
Finally, the Rules allow applicants to comply with the requirements set forth therein by way of a Technical Operator (legal entity with experience on administration, management operation and maintenance of natural gas storage facilities, of no less than 5 years).
A Technical Operation Agreement must be entered by and between the applicant and the Technical Operation.
- Types of facilities under the Rules
In order to determine the relevant technical requirements for each specific registration, the following categories are established in the Rules:
(i) Large LNG storage: facilities equaling or exceeding 15.000 m3.
(ii) Micro/small LNG storage: facilities of less than 15.000 m3.
(iii) CNG in bulk: facilities which load or unload CNG in bulk or mobile equipment.
(iv) Underground reservoirs: (a) depleted gas reservoirs; (b) salt caverns; (c) water aquifers, and (c) coal bed methane.
- Penalty regime
The Regime foresees a penalty regime raging penalties to revocation of the authorization, prior notice and defense by the natural gas storage agent.
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At TRSyM we are available to provide clarifications or further information of any matter addressed above. For further information, please do not hesitate to contact either Nicolás Eliaschev or Javier Constanzó.