Watch out for creation of a Central Gas Authority

Vol 8, PW 17 (17 Nov 04) People & Policy

More details are emerging on the governments plans to regulate the gas sector within the ambit of the Petroleum Regulatory Board Bill.

We learn, for example, of plans to set up a Central Gas Authority (CGA) to develop a comprehensive set of technical and safety standards as well as a code for the connectivity of the national gas grid. Adherence to such standards and the code will be an integral condition of authorisation for transmission pipelines, reads the note.

The CGA will act as the technical arm of the regulator. In the note, pipelines have been split into five categories: low pressure pipelines; local distribution networks; upstream pipelines; pipelines laid to supply gas to a specific consumer; and transmission pipelines.

Construction of all transmission pipelines will require authorisation from the regulator. After scrutiny of the applications the regulator will form an opinion about the need of such transmission pipeline, adds the note.

If more than one company wants to build a transmission pipeline on the same route, the regulator will base his decision within the following parameters: Governments long-term plan for development of the pipeline network to facilitate early establishment of a National Gas Grid Early monetisation of gas Increasing availability of gas to consumers Impact on efficiency and interconnectivity of gas transportation system Source of gas and markets that these pipelines will serve Proposed terms of transmission tariff Time frame for completion of the project. Authorisation may be cancelled, with forfeiture of its security deposit, if conditions are not adhered to or the project is delayed beyond stipulated milestones, warns the note.

The government also gives powers to the CGA to set up a committee of gas transporters to advise on managerial and operational aspects of transmission pipelines. Transportation rates will be approved by the regulator and shall be treated as ceiling rates for negotiated tariffs.

The transportation rate will be based or calculated on: Reasonable rate of return on investment to recover costs Factors encouraging competition Mutually negotiated tariffs Capital and operational costs to be progressively benchmarked to international best practices and determined by a competitive method Authorised entity shall adopt the transportation rate determined through a transparent processAlso proposed is increased cooperation with state governments in the planning and construction of transmission pipelines through 10-year perspective plans.