Date: 2014-02-19Category: Extra OrdinaryState: Union GovernmentCountry: India
These regulations may be called the Petroleum and Natural Gas Regulatory Board (Affiliate Code of Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline) Amendment Regulations, 2014.
Executive Summary:
This document contains amendments to the Petroleum and Natural Gas Regulatory Board Affiliate Code of Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline Regulations, 2008. It mandates legal separation for entities engaged in both marketing and transportation of natural gas. These entities must create a separate legal entity for transportation activities by March 31, 2017.
Key Points / Main Content:
Amendments to Regulations:
* These regulations are called the Petroleum and Natural Gas Regulatory Board Affiliate Code of Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline Amendment Regulations, 2014.
* The regulations come into force on the date of their publication in the Official Gazette.
Legal Separation Mandate:
* A new regulation 5A is inserted, requiring legal separation.
* Entities engaged in both marketing and transportation of natural gas must create a separate legal entity for transportation.
* This separation must be completed on or before March 31, 2017.
* The separate legal entity will conduct the activity of transportation of natural gas.
* The right of first use shall be available to the affiliate of such separate legal entity.
Impact Analysis:
Entities Engaged in Marketing and Transportation of Natural Gas:
* Impact: These entities are required to undergo legal separation of their marketing and transportation activities.
* Action Required: Create a separate legal entity for natural gas transportation activities by March 31, 2017, ensuring the right of first use is available to the affiliate of such separate legal entity.
Key Entities Referenced
Petroleum and Natural Gas Regulatory Board: A regulatory body in India responsible for regulating the petroleum and natural gas sector.
Petroleum and Natural Gas Regulatory Board Act, 2006: An Indian law that established the Petroleum and Natural Gas Regulatory Board and defines its powers and functions.
Petroleum and Natural Gas Regulatory Board Affiliate Code of Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline Regulations 2008: Regulations established by the Petroleum and Natural Gas Regulatory Board governing the conduct of entities involved in marketing natural gas and building/operating natural gas pipelines.
New Delhi: The location where the notification was issued and where the Petroleum and Natural Gas Regulatory Board is likely located (Delhi).
Right of First Use: A preferential right granted to an affiliate of a separate legal entity for the transportation of natural gas.
Vision 2030 Natural Gas Infrastructure in India: A report that provides insights into the future of natural gas infrastructure development in India.
31st day of March 2017: The deadline set for entities engaged in both marketing and transportation of natural gas to create separate legal entities for these activities.
Petroleum and Natural Gas Regulatory Board Guiding Principles for Declaring or Authorizing Natural Gas Pipeline as Common Carrier or Contract Carrier Regulations, 2009: Regulations that outline the guiding principles for declaring or authorizing natural gas pipelines as common carrier or contract carrier.
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THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
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पाद 4ट< पणी: मलू !व#नयम> को 540(अ) 4दनांक 17-07-2008 (वारा अIधसIू चत Sकया गया था।
PETROLEUM AND NATURAL GAS REGULATORY BOARD
NOTIFICATION
New Delhi, the19th February 2014
F. No. PNGRB /M(C)/42.—In exercise of the powers conferred by section 61 of the Petroleum and Natural
Gas Regulatory Board Act, 2006 (19 of 2006), the Petroleum and Natural Gas Regulatory Board hereby makes the
following regulations to amend the Petroleum and Natural Gas Regulatory Board (Affiliate Code of Conduct for Entities
Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline) Regulations
2008, namely:—
1. Short title and commencement.
(1) These regulations may be called the Petroleum and Natural Gas Regulatory Board (Affiliate Code of
Conduct for Entities Engaged in Marketing of Natural Gas and Laying, Building, Operating or
Expanding Natural Gas Pipeline) Amendment Regulations, 2014.
(2) They shall come into force on the date of their publication in the Official Gazette.
2. Insertion of new regulation 5A.
After regulation 5 of the Petroleum and Natural Gas Regulatory Board (Affiliate Code of Conduct for Entities
Engaged in Marketing of Natural Gas and Laying, Building, Operating or Expanding Natural Gas Pipeline)
Regulations, 2008, the following shall be inserted, namely:—
“5A. Degree of Legal separation.
An entity engaged in both marketing of natural gas and laying, building, operating or expanding
pipelines for transportation of natural gas on common carrier or contract carrier basis, shall, on or
before the 31st day of March, 2017, create a separate legal entity so that the activity of transportation
of natural gas is carried on by such separate legal entity and the right of first use shall be available to
the affiliate of such separate legal entity.”.
K. RAJESWARA RAO, OSD(R)
[ADVT. III/4/Exty./188/13]
Explanatory Memorandum
Under the provisions of section 21 (Right of first use) of the Petroleum and Natural Gas Regulatory Board Act,
2006, the Board may require an entity which is carrying on both the activities of marketing of natural gas and its
transportation to separate these activities which may include separation of the ownership of the pipelines. Under the
Petroleum and Natural Gas Regulatory Board (Guiding Principles for Declaring or Authorizing Natural Gas Pipeline as
Common Carrier or Contract Carrier) Regulations, 2009, in cases where the activities of marketing of natural gas and
transportation of natural gas are carried out by separate entities, the right of first use of the pipeline will continue to be4
THE GAZETTE OF INDIA : EXTRAORDINARY [PART III—SEC. 4]
available to the associate entity of the transporter till such time the separation of ownership (managerial ownership) takes
places. Also, under the Petroleum and Natural Gas Regulatory Board (Affiliate Code of Conduct for Entities Engaged in
Marketing of Natural Gas and Laying, Building, Operating, or Expanding Natural Gas Pipeline) Regulations, 2008 the
rights and obligations between the transportation entity and its marketing affiliate have been laid down.
2. The Board after issuing a concept paper on the unbundling of marketing and transportation activities of natural
gas and subsequent public consultation and deliberations, has decided to mandate legal separation of an entity engaged in
marketing of natural gas and laying, building, operating or expanding pipelines for transportation of gas on common
carrier or contract carrier basis on or before 31.03.2017 by creating separate legal entities so that the activity of
transportation of natural gas is carried on by such separate legal entity and the right of first use shall be available to the
affiliate of such separate legal entity. The primary considerations for mandating legal separation within the set timelines
are:—
(i) It is an essential requisite for ensuring arms length transactions between gas transportation entities and their
customers, thus leading to development of fair and competitive gas transportation markets.
(ii) It would be a step further towards determination of fair and accurate transportation tariffs.
(iii) Based on studies contained in the report titled “Vision 2030” - Natural Gas Infrastructure in India”, the indicator
of pipeline length, volumes, availability of natural gas from various sources and entities operating in the
transportation infrastructure sector shows that market maturity would peak in 2016-17 therefore, synchronizing
with the set timelines for ensuring legal separation of transportation activities from other activities of the entity.
(iv) Since administrative, financial, technical, taxation and legal issues would arise in performing legal separation,
sufficient time period (upto 31.03.2017) needs to be allowed to entities for resolving such issues.
3. The proposed amendment to the Regulations accordingly mandates that an entity engaged in both marketing
and transportation of natural gas shall, on or before the 31st day of March 2017, create a separate legal entity so that the
activity of transportation of natural gas is carried on by such separate legal entity and the right of first use shall be
available to the affiliate of such separate legal entity.
Foot Note: Principal regulations were notified vide G.S.R. 540(E) 17-07-2008.
Printed by the Manager, Government of India Press, Ring Road, Mayapuri, New Delhi-110064
and Published by the Controller of Publications, Delhi-110054.