New Technical Guidelines for Oil and Gas Gathering Activities | Denton
On July 18, 2022, the National Hydrocarbons Commission (“NHC”), published in the Federal Register (“DOF”), “ORDER CNH.03.005/2022, publishing Technical Guidelines for the Collection of Hydrocarbons” (the “Des Guidelines”).
The guidelines were approved during the 86th extraordinary session of the CNH on December 2, 2021, being the first regulations published specifically regarding the collection of oil and gas.
Pursuant to Article 4 Section XXXI of the Hydrocarbons Act (the “HA”), gathering activities are part of the extraction activities carried out by regulated parties. In addition, Article 43, Section I, point (d) of the LH establishes the authority of the CNH to regulate the collection of hydrocarbons, which must be carried out within the framework of an exploration and extraction agreement or a right to an assigned area.
The purpose of the guidelines is to establish parameters and procedures to regulate collection by operators. The guidelines regulate: (i) the technical and economic requirements for carrying out collection activities; (ii) development and operation of new infrastructures in which collection activities are carried out; and (iii) criteria for non-unduly discriminatory access to assembly facilities and services.
Please see below the most important points of the guidelines:
Development of pipeline collection systems.
The collection facilities to be built, installed and fitted out are included in the plans, programs, investment programs and budgets approved by the CNH.
The Guidelines also establish the obligation to carry out a market analysis when the following events occur: (i) the construction of a new Pipeline Gathering System inside and outside the Contract Area or Authorization; (ii) Expansion or expansion of a pipeline collection system; or (iii) restoration of a pipe collection system is carried out. The analysis must be carried out before the construction, installation, development or restoration of facilities.
CNH may exempt the oil operator from carrying out the market analysis when it submits a technical and economic justification on the reasons for which it considers that the Available Capacity to be offered is not feasible for the demand of other Users. On the other hand, the CNH will have a maximum period of 20 (twenty) working days to respond, failing which the approval will be deemed granted.
The market analysis would resemble an open season for capacity and would imply the obligation to scale, expand and extend the collection system if requests for services are received and are technically and economically feasible. To this extent, and in all respects relating to non-unduly discriminatory access to muster facilities and services, the guidelines are similar to the open season regulations for transport systems, but with the difference that only other operators can request access.
Provision of services.
The modalities contemplated by the Guidelines are (i) service under the Contractual Reserve modality and (ii) service under the Common Use modality.
In accordance with the Directives, the Contractual Reserve regime ensures the availability of the service to the User, it therefore has priority over the Common Use regime. In addition, it cannot be subject to interruptions, reductions or suspensions, except in the event of Force Majeure.
Prior to the provision of the collection service, the Oil Operators will obtain CNH’s approval of the terms and conditions for the provision of the service (“TCPS”).
The Guidelines also set forth the obligation to provide pipeline gathering service to any Applicant or User. To do this, they must facilitate and provide non-unduly discriminatory access to use the capacity of their pipeline collection systems.
The provision of the service will be the subject of (i) a Service Contract between the oil operator and the User; (ii) the existence of available capacity in the Pipeline Collection System or common-use service capacity, depending on the modality concerned; and (iii) the provision of the service is technically feasible and economically viable.
With respect to the TCPS, these should reflect common practice in the provision of pipeline gathering services, as well as seek efficiency in the provision of such services.
The Directives establish the possibility for Oil Operators to allocate a percentage of the capacity of their Collection Systems to move the hydrocarbons they extract on the basis of the corresponding Agreements. Consequently, it will be the operator who will propose to CNH the percentage to be allocated for the use of the operator.
As far as tariffs are concerned, oil operators must charge them on the basis of what is established in the corresponding agreements for the exploration and extraction of hydrocarbons.
Collection by means other than pipelines.
The Directives establish the possibility that, when the construction of pipelines is not economically viable, the operator may contract the collection of hydrocarbons extracted from its Contract Area or its Right by means other than pipelines. However, the operator who intends to collect by means other than pipelines must comply with the regulations in force concerning the use of non-associated natural gas.
The Guidelines establish the obligation for operators to include in the TCPS clauses providing for bonuses or penalties to be applied in the event of service suspensions caused by events other than force majeure.