What is the regulatory regime that applies to gas storage (not LNG)? Are there any gas storage facilities in your jurisdiction?
Oil & Gas
Gas storage activities are regulated by the Gas Law, and can be performed by companies or consortia incorporated and with headquarters and management in Brazil, subject to the ANP authorization or a concession regime preceded by a public auction.
The performance of gas storage in geological hydrocarbon reservoirs returned to the ANP or in other geological formations is subject to a concession contract preceded by a public bid. The MME delegated to the ANP powers to define such geological formations whose gas storage activities will be subject to a concession regime.
Currently, according to ANP Resolution No. 17/2015, only concessionaires of exploration and production activities are authorized to store natural gas in geological hydrocarbon reservoirs.
Gas storage operations are also subject to a special licence under the Energy Act, granted and regulated by the State Energy and Water Commission. The regulatory regime is not comprehensively developed due to lack of new facilities constructed with private investments in the last decades. Independent legal analyses have so far inferred that underground storage should need concession rights to use and operate the reservoir.
The only operating gas storage facility in Bulgaria is Chiren, built in 1974. It is operated by the state-owned gas transmission operator, Bulgartransgaz. It is built upon a depleted gas condensate reservoir. The current capacity of the gas storage may ensure 5 813 500 MWh natural gas. There is a project for extension of the capacity, and ongoing detailed feasibility studies.
For many years there have been plans for developing a gas storage in the depleting offshore gas production block Galata. However, the State has never permitted or embarked into serious realization of the project.
In the Republic of Croatia there is one gas storage system – gas storage Okoli, located some 60 km from Zagreb. Gas storage system is operated by the indirectly state-owned operator, company Underground gas storage Ltd.
The functioning of the gas storage and the work of the operator are regulated by the Gas Market Act, Rules of Use of the Gas Storage System and certain other energy rules and procedures.
Rules of Use of the Gas Storage System regulate the reservation and capacity usage procedure, nomination of usage of the storage, trading with the storage capacities, services of storage system operator and general terms and conditions for the use of the storage.
The storage has an operating volume of 5 050 000 000 kWh and serves as a seasonal storage facility where the technological process is carried out in two cycles: injection cycle from April until September and withdrawal cycle from October until March. The operating volume of the standard bundled unit (SBU) is determined in the amount of 50 GWh i.e. 50 000 000 kWh.
According to the current legislative framework, the storage system operator has to allocate appropriate amount of SBUs for the public service supply. At the moment, 60% of the gas storage capacities are held by state-owned HEP d.d., acting as a wholesale gas supplier.
Law 3428/2005, as in force, sets out the framework for the operation of the gas market in Greece and includes also provisions relating to the gas storage. This law has transposed Directives 2003/55/ EC and 2004/67/EC into Greek law. According to the national regulatory framework, there are two possibilities for implementation of the development of an underground gas storage facility: a) As part of NNGS (Articles 6 and 7, par. 3 of Law 3428/2005).b) As an Independent Natural Gas System (Articles 15 and 18 of Law 3428/2005), which is not part of NNGS, regardless of interfacing with this System. In any case, the contactor must apply for installation and operation permits of the storage tanks, along with the relevant Ministerial approval. Until today, there are no gas storage facilities in Greece. However, a tender for the utilization of a depleted natural gas field in the offshore South Kavala region as an underground gas storage facility will be launched in early 2020.
Gas storage is subject to concession. The ways in which the concession is granted are established in Legislative Decree no. 93/2011.
Storage concessions are granted by decree of the MiSE, together with the Region concerned, after an environmental compatibility clearance has been obtained from the administration concerned.
The single procedure for the granting of the concession is structured in various phases which give points to the project on the basis of the following criteria:
a) completeness and rationality of the storage project and the relevant works programme proposed on the basis of geological studies and application of simulation models;
b) planned times for the performance of the works and for full operation in relation to the storage performances provided for in terms of working gas and performance of the delivery and injection point;
c) manner of the performance of the works, with particular regard to safety and environmental protection, and environmental or safety at work certifications;
d) envisaged efficiency of the storage;
e) minimum duration of inflow/outflow;
f) use of original potential of the deposit (ratio between working gas and the original deposit); and
g) ratio between operating costs/working gas.
Points from 0 to 10 are assigned to the project for each of the criteria from a) to c), points from 0 to 5 are assigned for each of the criteria from d) to g), with points for the project equal to the sum from a) to g) for a maximum total of 50 points.
Should the project not reach sufficient quality levels, equal at least to a total of 26 points, it will be rejected, and if there is competition, excluded from the ranking.
If there is a favourable outcome, the decree provides for the limits to be allocated to storage with the relevant shares and guarantee clauses on the attaining of minimum targets as specified in the application; in particular, for working gas.
The decree granting the concession is served on the licence-holder, the MATTM, the Regions and the Municipality are all involved in the process, and is published in the Official Bulletin as well as on the website of the MISE, setting forth the works programme approved and the relevant performance times and, if there is competition, the reasons adopted for the selection. The same decree approves any additional appurtenant actions. The decree shall also be published, by the applicant, in the Official Journal and in a national daily newspaper.
The procedure has an overall maximum duration of 180 days, subject to the times necessary for the compulsory sub-procedures for which other administrations are responsible.
Concessions for the storage of natural gas shall remain in force for 30 years, which may be extended, no more than once, by another 10 years.
Stogit- Snam and Edison Stoccaggio are the most significant gas storage companies in the Italian market. The storage sites are more frequently present in Northern Italy, where the demand for gas is concentrated.
Permit from CRE.
Natural gas activities are regulated and supervised by CRE.
As of today, CRE has not issued permits related to natural gas storage. All storage permits that have been issued have been granted for oil products such as gasolines, diesel and jet-fuel.
Notwithstanding the above, as in LNG, in order to carry out activities related to natural gas a permit from CRE must be secured in which CRE will include, among other matters, (i) terms and conditions applicable to the intended activities; (ii) obligations for permit holders; (iii) authorized infrastructure.
No activities related to natural gas may be carried out without holding this permit.
Social impact evaluation.
As per the Hydrocarbons Law, prior obtaining a permit to develop hydrocarbons projects, among them gas facilities, companies must file a social impact study before SENER, which must include, among other matters: (i) identification, prediction and assessment of the possible social impacts that could derive from the project and activities; (ii) mitigation measures; (iii) social management programs.
In any case, SENER will issued a resolution which may include recommendations that must be observed by company’s prior development of their projects.
Additional licenses and permits.
Since gas storage facilities are usually developed and constructed in land, additional regulatory regime could apply besides the permit that must be obtained by CRE, mainly in connection with matters that are of local and municipal jurisdiction (i.e. use of land, construction, operation, civil protection). Additional regulatory regime will vary depending the place in which the facility is to be developed.
Additional permits / authorizations of federal jurisdiction could be required for the development of a gas storage project, mainly regarding environmental matters such as an environmental impact study or environmental risk assessment.
Existing gas storage facilities in México.
As of this date there are no major gas storage facilities in Mexico, however, a project is currently being developed and analysed by SENER and CENAGAS under the name of “strategic storage” which aims to be developed in a major field that was classified as non-useful for the extraction of hydrocarbons known as “Jaf”. The purpose of this project is to storage approximately 10 thousand million cubic feet of natural gas as to have reservoirs for between 3 to 5 days in case of national emergencies.
It results from the Law no. 09-71 dated 12 October 1971 related to safety stock and Order no. 393-76 dated 17 February 1977, as amended, that importers of refined hydrocarbons, refinery buyers and refinery operators are subject to an obligation to establish and maintain hydrocarbons safety reserve.
Furthermore, article 4 of Law No. 1-72-255 dated 22 February 1973 on the import, export, refining, takeover in refineries and filling centres, storage and distribution of hydrocarbons provides that the refiner, distributors of LPG, owners of filling centres and importers of refined hydrocarbons are required to have storage deposits with sufficient capacity to enable them to meet their safety stock obligations.
Despite these legal provisions, there is a lack of storage capacity and several investments are currently carried out by operators to comply with their legal obligations.
The activities and facilities related to the storage and transport of petroleum products, including local production, except with regard to the attribution of rights for petroleum operations under the terms of the applicable legislations in the geographical areas covered by such rights, are set out under the Rules on Import, Export, Distribution, Storage and Transport of Petroleum Products.
Downstream licences are granted upon application to the competent authority by the interested party and the application for a storage licence must include a description of the prices and tariffs for each service being rendered at the relevant facilities. Entities holding storage licences have an obligation to receive, dispatch, handle, store, mix or conduct – without discrimination and in acceptable commercial terms – a third party's fuel-related products in their facilities, as long as they have enough technical capacity, and provided that the products are technically compatible. This access for third parties is subject to a payment, based on the industry standards. The transfer of oil products between facilities, including by tank vehicles, is to take place in strict compliance with the applicable health, safety and environmental rules.
The construction of storage facilities will develop throughout the following years, as a result of the implementation of the projects of exploration of natural gas in the Rovuma Basin, in the North of Mozambique.
Nigeria possesses the largest natural reserves in Africa and the ninth largest in the world. It is estimated to be about 187 trillion cubic feet (tcf) of natural gas reserves. The natural gas reserves however remain unexploited even though huge quantities of gas are flared in the process of oil production. Gas storage in Nigeria is well regulated as the Federal Government recognised the huge financial loss associated with gas flaring and promulgated the Associated Gas Re-injection Act 2004 and the Associated Gas Re-injection (Amendment) Act 2004 which allowed for oil producing companies to summit detailed plans for gas utilisation and the prohibition of gas flaring without the permission of the Minister of Petroleum Resources.
The National Oil and Gas Policy (NOGP) 2004 included the establishment of a comprehensive National Gas Master Plan (the “NGMP”) to reinforce the development of gas infrastructure, including central processing facilities and transmission pipelines in Nigeria. While the natural gas policy is focused on promoting public-private partnership or a more effective commercialisation of the gas reserves, the Gas masterplan is focused on maximising the value inherent in the country’s gas reserves, with enhancement of increasing domestic usage of gas within the economy, while growing a high-value export market.
Nigeria possesses gas storage facilities comprising of approximately 1,100 km of pipelines, 7 gas systems and 14 compressor stations with an installed capacity of 2.1 bcf per day and 13 export terminals opened by the Nigeria Gas Company Limited (NGC) a wholly owned subsidiary of Nigerian National Petroleum Commission (NNPC). Some multinationals obtain licences and pipelines to supply their individual gas utilisation projects. These pipelines connect the gas fields to the project site or distribution lines for the downstream, from the factory gate to the end users. The gas pipeline infrastructure in Nigeria is situated in the southern part of the country.
There are gas storage facilities in Indonesia. Gas storage is generally regulated under Government Regulation No. 36 of 2004 regarding Downstream Oil and Gas Business Activity (“GR 36”). Gas storage activities may be conducted by upstream players as an ancillary activity to their main activities under the PSC (with the approval of the MEMR), or by a downstream business entity that engages in and is licensed to carry out storage activities. We note that such license is not required if the gas storage activities are ancillary to the downstream entity’s main processing, transportation or trading activities. A company engaging in the gas storage business is obliged to offer facility sharing to a third party, as the technical and economic aspects allow. Facility sharing is specifically regulated under BPH Migas Regulation No. 6 of 2005, issued by the Downstream Oil and Gas Regulatory Agency (“BPH Migas”).
The UK also has a number of underground commercial gas storage facilities, in the form of depleted gas fields and onshore salt cavity storage, totalling to approximately 1.3 bcm capacity.
A different regulatory regime applies to the development of gas storage projects, depending on whether the project is onshore or offshore. A third-party access regime, as described in question 13 above, also applies.
The Energy Act 2008 created a new offshore gas storage licensing regime in relation to gas storage and recovery of stored gas, or unloading of gas to installations or pipelines within the offshore area (as mentioned in relation to LNG, in question 13 above). In addition, offshore gas storage facilities also require a contractual grant of rights (in the form of a lease or authorisation) from the Crown Estate under the Crown Estate Act 1961.
For onshore gas storage projects, one permitting route is under section 4 of the Gas Act 1965, which provides for licensed gas transporters to obtain a storage authorisation order from the Secretary of State in order to develop or use underground natural porous strata for the storage of gas. The more usual permitting route for onshore gas storage projects is under the Planning Act 2008.
Health and safety and environmental requirements will also apply. Where a depleted gas reservoir is being converted into a gas storage facility, a petroleum licence is also likely to be required.
Natural Gas Market Law regulates gas storage and defines storage activity as storage of natural gas as LNG or gas, in order to meet the daily and seasonal changes and the deficit arising from lessening or stoppage of natural gas supply. According to Natural Gas Market Law, storage activities shall be conducted in storage facilities located underground.
Storage activities are subject to licences that must be obtained from EMRA which is the responsible authority for issuing licences with respect to downstream activities including storage, distribution and transmission. EMRA is also granted with the authority to set storage obligations for natural gas importers, provided that it does not exceed 20% of the gas they import annually.
In order to engage with natural gas storage activities, storage licence applicants must (i) have technical and economic sufficiency; (ii) undertake to operate its storage facility to ensure that the system is operated in a coordinated and secure manner; and (iii) undertake to provide neutral and equal storage services provided that the system is suitable.
Turkey has been aiming to prevent the effects of a possible interruption in natural gas supply from external resources by enlarging natural gas storage facilities and increasing the storage capacities so that daily natural gas demand across the country can be covered from storage capacity. Turkey aims to have sufficient storage capacity to meet at least 20 percent of its gas demand. In this context, as a result of investments in natural gas storage facilities in the last decade, a significant growth in underground storage capacity has been achieved. By the end of 2018 total capacity of underground natural gas storage facilities has reached to 3.236 million Sm3 whereas it was less than half of this capacity at the beginning of 2014 according to EMRA Natural Gas Market Report 2018.
There are two main storage facilities which contribute to domestic natural gas storage across Turkey:
- BOTAŞ Lake Tuz underground gas storage facility, located in the Aksaray province, 40km south of Lake Tuz in the Sultanhani district of Turkey, has a storage capacity of 600 million cubic meters currently. To this end, the Lake Tuz facility will have enough capacity to meet almost 10 percent of Turkey's current natural gas consumption of around 50 billion cubic meters per year. With the project expansion, the natural gas storage capacity at Lake Tuz underground natural gas storage facility will be increased to 5.4 billion cubic meters by 2023.
- BOTAŞ Silivri, Kuzey Marmara, Değirmenköy underground gas storage facility, located in the İstanbul province, has a working gas capacity of 2,84 bcm. Within the scope of Kuzey Marmara Natural Gas Storage Expansion Project, developed by the reason of increasing the capacity of related facility, it’s planned to increase total storage capacity to 4,6 bcm and withdrawal capacity to 75 mcm/day by 2021.
The Natural Gas Sector Law, 5762-2002 (the "NG Law") and the Natural Gas Sector Regulations 5768-2008 (the "NG Regulations") provide the Ministry of Energy the authority to regulate gas storage. Accordingly, the NG Law and NG Regulations provide the legal framework to the Natural Gas Authority on how to regulate gas storage facilities in Israel. The NG Law governs the midstream and downstream activities and sets out a licensing regime for Israeli natural gas infrastructure, including distribution, transmission, storage and LNG facilities. The Natural Gas Authority promotes long-term strategic planning for the construction and function of facilities. It ensures that gas facilities are designed to promote safety and are in line with Israeli and international safety standards. One of the primary roles of the Natural Gas Authority is determining safety orders, regulations, and procedures for planning construction, operation and maintenance of natural gas facilities, including conformation with specifications, operating procedures and emergency plans.
Both Tamar and Leviathan, the two natural gas fields that have begun production of gas, maintain facilities with the capacity for gas storage offshore on the applicable gas rigs. Israel does not currently maintain any long-term onshore gas storage facilities, although there are plans to create such facilities. Israel maintains storage facilities across the country that provide gas to localities. For example, the government operated Petroleum & Energy Infrastructures Ltd. ("PEI"), maintains short-term storage facilities, including in Haifa, Kiryat Haim, and Kiryat Tivon. PEI is currently promoting a project called the "North Lands" national project for the erection of new long-term facilities north of Haifa, using advanced technology to emphasize safety. The project would close the aforementioned terminals and develop an advanced facility east of the former terminals.
Storage of natural gas is regulated by the Act on common rules for the internal market in natural gas of 2002 (Natural Gas Act 2002 – NGA 2002). All storage facilities in Norway are subject to law compliant with the rules of the EU's third energy package. However, if the storage facilities are part of an upstream development, the Petroleum Act of 1996 will apply also for the storage.
Except for some minor onshore LNG gas storage facilities, there are no onshore natural gas storage facilities. There are no regasification facilities in Norway. The use of natural gas is mainly for export or reinjected in reservoirs for pressure maintenance or as temporary storage. Such reinjection forms a core component of the Norwegian resource management philosophy and enables improved or enhanced oil recovery.
The siting, construction, operation and abandonment of a natural gas transportation and storage facility in interstate commerce is also regulated by the FERC under the Natural Gas Act (NGA) and the Natural Gas Policy Act (NGPA). Similar to an LNG project, the FERC’s environmental-impact review of a proposed natural gas storage project results in FERC’s issuance of either an Environmental Assessment (EA) or an Environmental Impact Statement (EIS).
Contrary to services provided by LNG facilities, in the case of jurisdictional gas storage facilities the FERC also regulates the terms and conditions of services, although, under certain circumstances, the FERC does not require the approval of specific terms and conditions and permits the charging of market-based rates by the project owner. The U.S. has about 380 active underground gas storage facilities with a demonstrated peak storage capacity of approximately 4.3 trillion cubic feet of gas.