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Sunday, 18 December 2016

House approves in principle the deregulation of the natural gas industry

Deregulation of the natural gas industry is one very big step closer to being a reality after the House of Representatives gave its preliminary approval on Thursday to the Natural Gas Act. The deregulation of the sector is now one full vote away from becoming a reality. The law will come into effect and new licenses to operate will be issued in 2017, said Oil Minister Tarek El Molla, according to Al Shorouk. The ministry is currently working on the law’s executive regulations. Al Masry Al Youm carries what it says is a rundown on key features of the law — take them with a grain of salt, but they are in line with our expectations, if incomplete. Highlights:

  • New regulator: The law forms a new regulator that will issue licenses and permits, amend regulations and generally oversee the industry. Terms and conditions for using any node of the gas distribution infrastructure can be determined by the private sector but must be approved by the regulator.
  • Five primary industry roles are now open to the private sector: Pipeline operator, distributor, storage provider, gas shipper, and importer (defined below).
  • Privatization of the industry will take place in stages to be determined by the new regulator.
  • Pricing: The regulator will have a say on pricing of gas throughout the supply chain based on investment costs, maintenance, the cost of developing pipeline infrastructure and projected returns on investment.
  • Tolling exports: The regulator will set and collect a pipeline utilization fee on gas being exported from Egypt.
  • Pipeline operators: Own and operate the main pipelines that feed into distribution hubs. They must develop a five-year plan to grow their infrastructure. Operators can withhold gas if distributors fail to make payments.
  • Distributors: These will own and operate the local pipelines to which end-users are connected. The onus is on the distributor to build pipelines to the consumer. Distributors must also provide the government with regular data on gas consumptions. Both pipeline operators and distributors can set their pipeline utilization fees. They cannot ban usage of their networks unless the grid is at full capacity or there is failure to make payments on contracts
  • Storage providers must allow equal access to gas producers who can pay the fees the set.
  • Gas shipping operators: Can sell imported gas to pipeline operators.
  • Gas importers: Are not allowed to sell imported gas to pipeline operators unless they obtain a shipping license.

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