What is the regulatory regime that applies to the construction and operation of offshore and onshore oil and gas pipelines?
Oil & Gas
The ANP regulates the construction and operation of oil and gas pipelines, onshore or offshore, by companies or consortia incorporated and headquartered in Brazil. Such activities require the ANP prior authorization. The authorisations granted for construction and operation of gas pipelines before the enactment of the Gas Law were ratified by such law. The construction, expansion and operation of new gas pipelines must be submitted to the Ministry of Mines and Energy (MME) and the ANP.
The performance of gas transportation activities shall be authorised by the ANP or granted through a concession contract preceded by a public bid. However, to date, gas transportation activities in Brazil were entirely regulated by authorizations issued by the ANP. ANP has never executed a concession contract for gas transportation.
The provisions for third-party access are set out in the Petroleum Law and the Gas Law. The ANP Resolutions No. 35/2012 and 11/2016 regulate the principle of open access. Under the open access regime, a transporter must allow non-discriminatory access by shippers to its transportation facilities, with the payment of an adequate compensation according to the criteria established by the ANP, taking into account temporary exclusivity provisions granted to the owner of the facilities, if applicable. Currently, third-party access rights are not applicable to LNG terminals and production offloading pipelines.
Existing offshore and onshore oil and gas pipelines are owned and operated by state-owned entities, JANAF d.d. as the oil pipeline operator, and PLINACRO d.o.o. as the gas pipeline operator.
The construction, maintenance and operation of energy infrastructure is part of the National Strategy of Energy Development and the Program for its implementation. The construction of new pipelines is further subject to licensing, issuing of building and location permits, ecological impact assessments, as well as legislation concerning property rights and expropriation, amongst others. Offshore pipelines also have to consider the regulation of maritime domains.
Pipeline operators have to provide energy market subjects access to the pipelines in a fair, open market manner and under non-discriminatory terms and are charged with the maintenance of the pipelines.
Public Gas Corporation (DEPA), founded in 1988 with a view to efficiently cover all the needs arising from the establishment of natural gas network and is until today the public gas supplier company in Greece which participates actively in the major task of transporting natural gas. Its subsidiary, under the name DESFA SA, was founded in 2005, with the aim of liberalizing the gas market. Laws 3428/2005 and 4001/2011, provide the regulatory regime for construction and operation requirements of oil and gas pipelines in Greece both onshore and offshore. Until today, DESFA SA, continues to maintain the ownership and the operations rights of the National Natural Gas System (NNGS) in Greece and the Regulatory Authority for Energy (RAE) is the competent authority for overseeing and regulating the Greek natural gas market .
The construction and operation of oil and gas pipelines are subject to certain Ministerial Decrees issued by the MISE (such as the Ministerial Decree of 17 April 2008) containing technical specifications for design, pressure levels, safety of the transportation system, environmental protection et cetera.
With respect to offshore pipelines mention should also be made of the recent Directive (EU) 2019/692 of 17 April 2019 which amended Directive 2009/73 of 13 July 2009 on common rules for the internal natural gas market.
Construction and operation of oil and gas pipelines is usually made: (i) by private companies having an interest in developing pipelines for certain specific areas in Mexico, or (ii) upon a tender procedure called by a government authority to develop a specific project.
Prior permit required from CRE.
Prior construction of a pipeline a permit must be secured by developer from CRE in which CRE will: (i) authorize the intended activity; (ii) authorize the project; (iii) set the conditions and characteristics for the design and construction of the pipeline system, including technology and engineering specifications; (iv) authorize construction of the required works.
Its construction is usually regulated by: (i) permit issued by CRE; and (ii) by means of Mexican Official Standards, which set specifications and criteria for, among other matters, the design, construction, operation, maintenance, closing-down of such pipelines.
Additionally, local and municipal regulations (mainly related to construction provisions) will apply and vary depending the place in which they are to be developed.
Onshore pipelines represent major challenges for developers mainly since they have to secure surface rights over all of the properties under which the pipeline will cross.
Pipelines tendered by government.
Public entities, mainly the Federal Electric Commission (“CFE”) and CENAGAS usually call for tenders to construct and develop oil and gas pipelines (either in onshore or offshore areas).
Requirements for the construction will be regulated by: (i) permit issued by CRE; (ii) specific rules and requirements included in the tender guidelines released by the authority that requested the construction of such pipeline; and (iii) Mexican Official Standards.
As an example of the above, in 2015 CFE released the tender guidelines for the design, construction, operation and maintenance of a marine pipeline with a length of 772 km. The type of contractual scheme was a service contract awarded by means of an international public tender. Term of the awarded contract was of 35 years. Remuneration for the awarded company was composed by: (i) a fixed fee for capacity; and (ii) a variable fee for the use.
Social impact evaluation.
As per the Hydrocarbons Law, prior obtaining a permit to develop hydrocarbons projects, 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.
Once a pipeline has been constructed its operation mainly relies on a permit issued by CRE for a 30-years term and, in any case, by the additional federal, local and municipal permits required for the project (i.e. environmental impact assessments, construction licenses, civil protection programmes, among others).
The referred permit issued by CRE will set the conditions under which the operation will be carried out (i.e. transportation), including the authorized activity, restrictions, route, operative capacity, operation and maintenance provisions.
In addition to the terms and conditions included in each permit, permit holder will have to comply with the legal administrative provisions issued by CRE in connection with activities carried out by means of pipelines.
CRE will be the regulatory authority in charge of supervising the compliance of the permit, as well as of the legal framework applicable to the authorized activities. In case of any breach to the permit or applicable regulations, CRE will be entitled to impose sanctions.
Notwithstanding the above, additional federal, local and municipal authorities may intervene in supervising activities related to the pipeline system (i.e. federal environmental authorities such as ASEA, local authorities regarding civil protection matters, among others).
The construction and operation of oil and gas pipelines falls within the scope of ancillary installations which refer to installations used to carry out ancillary activities.
Ancillary activities are defined as "operations relating to the separation, preparation, loading and transport of extracted hydrocarbons, for the purpose of making such hydrocarbons marketable, together with the development of such installations as are necessary for this purpose."
In this respect, articles 50 et seq. of the Hydrocarbon Decree provides for specific rules in relation to ancillary activities carried out by concession holders and distinguishes between installations that do not have any interest for the public and those having an interest for the public to determine how the construction of the considered installation will be financed and operated.
Notwithstanding the above, implementation plans relating to the building of pipelines must be approved by the Ministry in charge of Energy - fuels department.
The development of pipelines and/or infrastructure necessary for the transport and distribution of oil is also subject to general statutory obligations in relation to the environment, rights of way and urban development.
In this respect, to facilitate access to private land, the Hydrocarbon Law provides for specific rules to resolve the situation where the concession holder does not agree with a private land owner to access its land. In such case, the Holder may be authorized by the authorities to occupy on a temporary basis the land located within the permit / exploitation concession area which is needed to carry out exploration, exploitation and transport of hydrocarbons or for the building of railways, workshops and ancillary industries.
On a separate note, it is worth noting that the Dahir dated 30 December 1927 relating to the transportation of hydrocarbons and liquid fuels provides with specific terms and conditions to comply when carrying out transportation activities.
Please refer to the answer to question 2. Above.
The Department of Petroleum Resources regulates the issuance of permits for the construction and operation of oil and gas pipelines. This is enshrined in Section 3 of the Pipelines Act 2004. The section provides for the construction and operation of Pipelines in Nigeria by persons who are holders of an Oil pipeline license or is acting on behalf of the holder and has obtained the consent of the minister to do same under Section 25 of the Act. Worthy of note also is the provisions of Section 3 of the Petroleum Act 1969 which provides for the acquisition of a construction license from the DPR for the operation of a gas processing facility. The Federal Ministry of Environment equally stipulates the issuance of an environmental impact assessment certificate to all facilities that seek to construct and operate any natural gas storage facility.
Offshore construction is subject to two different regimes depending on the marine sector. Construction beyond the territorial sea is regulated by the general principles of the international law of the seas. Construction of exploration and production facilities would not require a construction permit, but will require relevant rights in an exploration or production licence. Laying down of oil or gas pipelines would also not require special construction permissions, but the State’s sovereign rights in the exclusive economic zone and the continental shelf shall be respected. Further, environmental regulations may need to be complied with, including EIA procedures will be required in most cases.
The zone within the territorial sea and internal waters is governed by a general spatial plan. Water use permit, detailed spatial plan, and construction permit must be obtained, and environmental procedures shall be followed for each particular construction. The special regulatory regime of the coastal area must also be observed upon a pipeline reaching the land.
Onshore, construction of any oil and gas installations follows the general spatial development and construction regulations, along with technical and environmental requirements.
Oil and gas pipelines may be constructed for upstream companies (by a service company) and operated by upstream companies as part of their production infrastructure or transportation activities, as an ancillary activity to their main activities under the PSC (but only after obtaining MEMR approval of the development plan). Oil and gas pipelines can also be constructed by downstream business entities that engage in and are licensed to carry out oil and gas transportation activities. We note that such license is not required if the gas transportation activities are ancillary to the downstream entity’s main processing, storage or trading activities.
MEMR Regulation No. 18 of 2018 regarding Safety Inspection of Installations and Equipment in Oil and Gas Business Activities (“MEMR Reg. 18/2018”) requires a PSC Contractor or a downstream business entity to ensure that the design, engineering, construction, operation, maintenance, testing, inspection and implementation of oil and gas installations and equipment, including pipelines, comply with applicable laws and regulations, technical standards acknowledged by the MEMR, and good engineering practices. It also requires inspections and operability approval for such installations and equipment.
For offshore pipelines, a Pipeline Works Authorisation (PWA) must be applied for under the Petroleum Act. For most onshore pipelines, the permitting process requires an authorisation under the Pipe-lines Act 1962. In all cases, there will be various other requirements and consents that need to be obtained, including environmental consents.
Construction and operation activities involving oil and gas pipelines require following licence, certification and permits:
(I) A transmission licence from EMRA,
(II) Certificates required by natural gas market laws,
(III) Permits required by petroleum laws,
(IV) An environmental impact assessment report (“EIA”) (for the construction),
(V) An EIA approval certificate from MEUP (for the construction).
***Some other additional requirements may be imposed depending on the particulars of the pipeline construction project in question such as specific approvals from BOTAŞ.
Initially, transmission licence must be obtained by legal entities that wish to transport petroleum or natural gas through pipelines and operate transmission facilities from EMRA.
In terms of natural gas activities, Natural Gas Market Law requires all construction works and services in relation to natural gas market activities to be performed by certain certificate holders. Certificates concerning internal installations and service lines are granted by public or private companies authorized by EMRA and local distribution companies. Companies intending to conduct feasibility, project, surveying, consultancy, control and audit studies and construction, service, maintenance and repair works must also obtain a certificate from EMRA. In accordance with the Regulation on Certification in Natural Gas Market dated September 25, 2002 and numbered 24887, which sets forth the principles and procedures regarding the certificates to be granted to individuals or legal entities, there are two types of certifications for natural gas; Construction And Service Certificate, Domestic Installation And Service Certificate. It should be noted that such certificates are granted for a minimum period of 10 years and a maximum period of 30 years in gas market.
With respect to petroleum activities, TPA 6491 and its secondary legislation Turkish Petroleum Law Implementation Regulation dated January 22, 2014 and numbered 28890 requires petroleum right holders to apply to GDPA in order to receive the necessary permits for the construction of pipelines.
Article 7 and Annex I, Environmental Impact Assessment Regulation (“EIA Regulation”) published in the Official Gazette No. 26939, dated 17 July 2008 requires an EIA for extraction of crude oil of 500 tonnes per day and extraction of natural gas of 500,000 cubic metres per day and for transportation of oil or gas with 600 millimetre calibre pipes that are longer than 40 kilometres.
An entity holding rights with respect to oil or natural gas can obtain the usage right over the relevant land by any of the following:
(I) Expropriation (where the expropriation amount is calculated by the court based on the market value of the property).
(II) A written purchase or lease contract with the owner of the land (where the purchase price or rent is negotiated freely by the parties).
(III) Having the owner of the land establishing a usufruct right over the land (where the usufruct arrears are negotiated freely by the parties).
Third parties wishing to obtain access to pipelines and other infrastructure must apply to relevant pipeline/infrastructure operator to be allocated capacity. The pipeline operator and the third party usually enter in a standard transportation agreement regulates access to the pipeline and transportation of oil and gas.
The Natural Gas Sector Law, 5762-2002 and the Natural Gas Sector Regulations 5768-2008 regulate the construction and operation of offshore oil and gas pipelines. The Natural Gas Sector Law authorizes the Natural Gas Authority, a segment of the Ministry of Energy, to promote the law's goals, such as regulating the natural gas facilities and maintaining their safety, including the pipelines connected to these facilities. Pursuant to Regulation 2592 adopted by the Israeli government in 2017, the government owned INGL was tasked with the establishment and operation of a pipeline system to connect the offshore gas wells to the shore for productions stemming from small and medium sized fields. In addition, the Offshore Pipeline Director Israel ("OPDI"), a supplement to the Partial National Outline Plan for Natural Gas NOP 37/A/2 (TAMA) December 2002, the Natural Gas Law, and Safety Decree, provides instructions and guidelines set forth by the Natural Gas Authority to assist the INGL in obtaining the necessary permits for the planning, design, manufacture, construction, operation, and maintenance of offshore high pressure natural gas pipelines.
The regulation of pipelines in the U.S. depends on their location. If a pipeline is located wholly within a state, the regulation of that pipe will be determined by that state, typically in the form of a public utility commission. Public utility commissions will typically regulate the location, construction, maintenance and safety standards of pipelines. If a pipeline crosses state lines, then it is deemed to be involved in interstate commerce and it will be regulated by the Federal Energy Regulatory Committee (FERC). The FERC is responsible for regulating interstate pipeline construction and operation, depending on the public use and necessity of such a pipeline.