COLOMBIA: UPCOMING GAS REGULATIONS IN COLOMBIA

• Jurisdiction: Derecho Internacional

International Mining and Oil & Gas Law, Development, and Investment
(Apr 2013)
CHAPTER 12A
COLOMBIA: UPCOMING GAS REGULATIONS IN COLOMBIA
Sandra Manrique
Partner, Prietocarrizosa
Bogotá

SANDRA MANRIQUE is a partner at prietocarrizosa. She heads the Energy and Natural Resources, Mining and Environmental practices. Sandra is particularly renowned for her expertise in regulatory matters in the energy sector, especially in gas issues. Prior to entering the Firm, she worked as Legal Director of ECOGAS (2003-2005), Attorney for the Ministry of Mines and Energy (2001-2003), Attorney for Gas Gombel S.A.E.S.P., a distributor of LPG (2002), Commercial and Technical Delegate to the Commission of Risaralda (1999 - 2000), and Attorney for Compañía Gas del Risaralda S.A. E.S.P, a distributor of natural gas in the Department of Risaralda (1998-1999).

I. Introduction

The regulatory structure for the commercialization of natural gas in Colombia is currently in transition. New regulation is being proposed by the Colombian Energy and Gas Regulatory Commission (in Spanish: "Comisión de Regulation de Energía y Gas" or"CREG" for its initials in Spanish) in which there is a change in both the regulatory structure and the perspective of how natural gas will be traded in Colombia.

The Colombian market on 2011 showed gas reserves of 6.630 GPC (giga cubic feet) and proved gas reserves of 5.463 GPC. This market has developed a high concentration on the natural gas supply, where most of the gas come from the field of Guajira, for the demand of the Atlantic coast, and the fields of Cusiana and Cupiagua for the demand for the interior of the country. Meanwhile, the gas transportation has been developed through natural monopolies that serve the demand for transport capacity connecting those fields to two major transportation systems.

In the recent years the Colombian market had to overcome with the shortage of natural gas, for this reason CREG has focuses the regulatory activity in a platform that has tended to internationalize the market, ensuring the domestic supply and providing reliability to the energy sector which is operated by natural gas. That is why in the recent years we have witness significant regulatory changes on the natural gas framework.

Under this new scenario, a comprehensive analysis of the new regulatory structure for the gas commercialization on the domestic market, the legal issues and the competitive environment of the Colombian market is needed for understanding what changes will take place in the upcoming years.

It is important to point out that in addition to the natural gas commercialization regulatory framework, several regulations have been issued since the end of 2012. Although these resolutions are not definitive, they aim to structure a comprehensive natural gas market, which is a more international market, as an example, regulations that encourage natural gas imports and exports.

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The purpose of this article is to examine the background of the commercialization of natural gas in Colombia and how the general conditions for the gas trade and transportation capacity in Colombia were set.

Also, this article will explain in general, the main issues of the future regulatory framework for gas commercialization, under a new resolution currently under discussion, which regulates natural gas commercialization mechanisms, the creation of a gas market operator, the standardization of gas trading agreements, the creation and separation of new markets and the regulation of new trading mechanisms.

II. Background

A. Description of the Domestic Regulation

Law 142 of 1994 created the current legal framework for natural gas commercialization. According to this framework, the natural gas service is a public utilities service, which is regulated in relation to the nature of the trading activity that has been developed by the agents. According to this regulation, the agents participating in the commercialization of natural gas are the producers, distributors, transporters and the marketers of natural gas.

Natural gas production activities are regulated by the Ministry of Mines and Energy (in Spanish: "Ministerio de Minas y Energia" or "MME" for its initials in Spanish), while the activities of natural gas commercialization, transportation and distribution, are regulated by the CREG, under the guidance of the Superintendence of Domestic Public Services (in Spanish: "Superintendencia de Servicios Públicos" or "SSPD" for its initials in Spanish).

Decree 2100 issued in 2011 (hereinafter "Decree 2100") established the mechanisms for assuring internal gas supply and a transitional regulatory period. Currently the natural gas market was expecting the issuance of a long term regulatory framework, in accordance with the parameters established by the Decree. This regulation is the current CREG Project of Resolution No. 113 of 2012.

In August 2011, CREG issued Resolution 118 of 2011. This resolution established the commercialization procedure for natural gas during the transitional period, in accordance with Decree 2100. This Resolution has already been modified by Resolutions 134 and 140 of 2011.

Natural gas transportation is regulated by CREG Resolution 126 of 2010, Resolution 79 of 2011 and Resolution 97 of 2011. These resolutions established the general principles for natural gas transportation remuneration and the general structure of charges/fees for the National Transport System.

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