Shale gas presentation final 16 april

Welcome!

The new shale gas markets of Eastern Europe: Poland and

Romania – key regulatory and contractual issues

EU Energy Conference Shale Gas

Claeys & Casteels

16 April 2013

Regulatory Issues

upstream

environmental

Contractual Issues

marketing and trading

Ownership regime

hydrocarbons - state owned natural resources

Authorities in Charge

State Treasury

Ministry of Environment

State Mining Authority

Polish Geological Institute

Government

National Agency for Mineral Resources (NAMR)– Regulatory

Authority

so far arguably the most active member state

shifting sands: from moratorium to ‘serious matter’

latest PM public statement: pro shale gas exploration,

followed in 5 years by a decision on development and

production

according to NAMR: there is no ban on shale gas

exploration

in the meantime recent protests in North-Eastern counties

of Romania

Primary Legislation

Title to Hydrocarbons

Who can hold a licence

Joint Operating Agreement, Unitisation & Farm-Out

Awarding procedure

Main Terms

Liabilities and Indemnities

Royalties

Decommissioning

Geological and Mining Law 2011

Energy Act 1997

Petroleum Act 2004

Energy Act 2012

Concession & Mining Usufruct

Concession – Administrative Document

• separate for the exploration and production phases

• issued by the Ministry of Environment

Mining Usufruct – Civil Law Contract

• exclusive right to explore, develop and produce

• entered into with the Ministry of Environment, as proxy for the

State Treasury exclusive proprietor of the hydrocarbons (inter

alia)

Petroleum Agreement

• grants the right to perform the ‘petroleum operations’

• grants a concession right for the state owned production

facilities

• covers exploration, development and production – individually

or combined

• exploration – can be performed based on a non-exclusive permit

valid for max 3 years (cannot be extended)

entities duly registered in Poland

legal person(s) Romanian or foreign

foreign legal persons - subsidiary or branch within

90 days as of the signing of the Petroleum Agreement

not expressly regulated

it could be construed that it is possible

the new draft clarifies the matter

possible with the prior approval of NAMR

financial and technical capability checks

public tender

several exceptions, including application for

production following exploration

tender initiated by the Min of Environment

published on the website of the Min of

Environment and EU Official Journal

at least 90 days to submit a bid

selection criteria:

technical and financial capability

proposed technology for the works programme

financial component

winner is awarded a concession and enters into

the mining usufructus with the Min of

Environment – up to 50 years

Statutory Principles:

effective use of the natural resources

transparency

non-discrimination

competition

confidentiality

Public tender initiated by the Regulator or any

interested party

Regulator selects the blocks, works and assets

Published in the EU and RO Official Journal

3 – 6 months to submit a bid

Bids: works programme, technical and financial

capability

Evaluation of the bids: 15-30 days

The winner enters into negotiations of the Petroleum

Agreement with NAMR

Petroleum Agreement: signed by NAMR and approved by

Government

Rights up to 30 years, can be extended once for up to 15 years

access to land subject to civil & commercial arrangements

access to oil and gas pipelines & any other

infrastructure

access to water subject to duly permitting

marketing and export

set up its own pipelines & ancillary installations, build

up roads, railroads, etc

request an extension of the licensed area

access data and information

appoint an operator

Duties

perform the works programme

forced unitisation

decommissioning plan and provision

arrange for waste water discharge facilities prior to any

exploratory drilling

pay the royalties

current legislation: no special regime for shale gas

to be negotiated and depends on the size of the licensed

blocks

Exploration:

One-time concession fee: PLN 218 X km2 of the licensed

blocks

Production:

high-methane gas: PLN 6.06 / 1000 m3 X gross production

over 2Q

other gas: PLN 5.04 / 1000 m3 X gross production over 2Q

3.5%* - below 10mil m3

7.5%* - between 10mil m3 – 50 m m3

9%* - between 50mil m3 – 200m m3

13%* - more than 200mil m3

* gross value of the extracted gas

newly introduced gas pricing deregulation tax: 60% of

the additional revenues incurred as a result of

liberalisation of the gas tariffs

the licensee is liable for the damages incurred

to third parties, land and water, unless he can

prove damages caused by someone else

the State Treasury can be ultimately liable

joint liability of the licensee and other

entities engaged in the operations

no statutory cap on liability

no special regime

tort and contractual liability – Civil Code

no statutory cap on liability

St

approved decommissioning plan

decommissioning fund (ring-fenced bank account): 3% of

the depreciation allowance for the fixed assets

decommissioning plan approved by NAMR

decommissioning provision throughout the entire term

of the concession

Strategic Environmental Assessment Directive 2001/42/EC

Act of 3 October 2008 on providing the information on environment

and its protection, participation of the society in environmental

protection and on assessment of the effects on the environment

(Dz.U.2008.199.1227, as amended)

Act of 27 April 2001 Environmental Protection Law

Environmental Impact Assessment (EIA Directive) Directive 2011/92/EU

no transposing legislation so far

Water Framework Directive – Directive 2000/60/EC

Act of 18 July 2001 – Water Law (Dz.U.2012.145 – unified text, as amended)

Regulation of the Minister of Environment of 15 November 2011 on forms and

ways of monitoring of uniform parts of ground- and underground water

(Dz.U.2011.258.1550, as amended)

Regulation of the Minister of Environment of 9 November 2011 on ways of

classification of a condition of uniform parts of ground- and underground

water and on environmental quality standards for the priority substances

(Dz.U.2011.257.1545, as amended)

Regulation of the Minister of Environment of 10 November 2011 on the list

of the priority substances regarding in water policy (Dz.U.2011.254.1528, as

amended)

Act of 5 January 2011 on amendment of Water Law and some other acts

(Dz.U.2011.32.159, as amended)

Regulation of the Minister of Environment of 23 July 2008 on criteria and

methods of evaluation of condition of underground waters (Dz.U.2008.143.896,

as amended)


Act of 7 June 2001 on collective water supply and collective sewage

disposal

Act of 3 June 2005 on amendment of Water Law and some other acts

Groundwater Directive – Directive 2006/118/EC

Regulation of the Minister of Environment of 15 November 2011 on forms

and ways of monitoring of uniform parts of ground- and underground water

Regulation of the Minister of Environment of 23 July 2008 on criteria

and methods of evaluation of condition of underground water

(Dz.U.2008.143.896, as amended)

REACH Regulation – Regulation 1907/2006/EC

directly applicable

Biocidal Products Directive - Directive 98/8/EC

Regulation of the Minister of Environment of 28 May 2008 on form of a

motion regarding issuance of entry to the registry, consent or temporary

consent, ways of providing the documentation and requirements which the

documentation necessary for the evaluation of active substance and biocidal

product shall comply with (Dz.U.2008.101.650, as amended)

Act of 13 September 2002 on biocidal products (Dz.U.2007.39.252 –

unified text, as amended)

IPPC Directive – Directive 2008/1/EC

Act of 3 October 2008 on providing the information on environment and

its protection, participation of the society in environmental protection

and on assessment of the effects on the environment (Dz.U.2008.199.1227, as

amended)

Industrial Emissions Directive – Directive 2010/75/EU

Act of 14 December 2012 on wastes (Dz.U.2013.21, as amended)

Mining Waste Directive – Directive 2006/21/EC

Act of 14 December 2012 on wastes (Dz.U.2013.21, as amended)

Act of 10 July 2008 on extractive wastes (Dz.U.2008.138.865, as amended)

Act of 22 January 2010 on amendment of Act on wastes and some other acts


Act of 16 November 2012 on amendment of Act on extractive wastes and some

other acts (Dz.U.2012.1513, as amended)

Habitats Directive – Directive 92/43/EEC

Act of 27 April 2001 Environmental Protection Law (Dz.U.2008.25.150 –


Act of 16 April 2004 on nature protection (Dz.U.2009.151.1220 – unified

text, as amended)

Act of 3 October 2008 on providing the information on environment and its

protection, participation of the society in environmental protection and on

assessment of the effects on the environment (Dz.U.2008.199.1227, as amended)

Act of 3 October 2008 on amendment of Act on nature protection and some

other acts (Dz.U.2008.201.1237, as amended)

Act of 13 July 2012 on amendment of Act on nature protection and some other

acts (Dz.U.2012.985, as amended)

Regulations of the Council of Ministers regarding statistical research

program of public statistics for years 2005-2013

Currently: Regulation of the Council of Ministers of 9 November 2012

statistical research program of public statistics for 2013 (Dz.U.2012.1391,

as amended)

Birds Directive – Directive 2009/147/EC

Act of 16 April 2004 on nature protection (Dz.U.2009.151.1220 – unified

text, as amended)

Act of 13 July 2012 on amendment of Act on nature protection and some other

acts (Dz.U.2012.985, as amended)

Seveso II – Directive 96/82/EC

Act of 27 April 2001 Environmental Protection Law (Dz.U.2008.25.150 –


Regulation of the Minister of Economy, Labour and Social Policy of 17 July

2003 on requirements which operational and rescue plans shall comply with

(Dz.U.2003.131.1219, as amended)

Seveso III – Directive 2912/18/EU

no transposing legislation so far

Environmental Liability Directive – Directive 2004/35/EC

Act of 13 April 2007 on prevention and remedying of environmental damages


Regulation of the Minister of Environment of 30 April 2008 on criteria of

evaluation of environmental damage (Dz.U.2008.82.501, as amended)

Regulation of the Minister of Environment of 4 June 2008 on types of

remedying as well as conditions and ways of performing them

(Dz.U.2008.103.664, as amended)

Strategic Environmental Assessment – Directive 2001/118/EC (SEA

Directive)

Government Decision 1076 of 2004

Environmental Impact Assessment (EIA Directive) – Directive 2011/92/EU

Government Decision 445 of 2009 (subsequently amended)


Water Act 107 of 1996

Groundwater Directive – Directive 2006/118/EC

Order of the Minister of Environment 137 of 2009


REACH Regulation – Regulation 1907/2006/EC

directly applicable

Biocidal Products – Directive 98/8/EC

Order of the Minister of Environment 1321/280/90 of 2007


IPPC Directive – Directive 2008/1/EC

Government Emergency Ordinance 152 of 2005

Industrial Emissions Directive – Directive 2010/75/EU

Not transposed so far

Mining Waste Directive – Directive 2006/21/EC


Habitats Directive – Directive 92/43/EEC


Birds Directive – Directive 2009/147/EC



Minister of Environment Order 1964 of 2008



Seveso II – Directive 96/82/EC




Seveso III – Directive 2912/18/EU

Not transposed so far

Environmental Liability Directive – Directive 2005/35/EC


Energy Act 2007

The Economic Activity Freedom Act 2004

Mandatory licensing as trader

Issued by the Polish NRA for 10 to 50 years

Market concentration at the level of imports and

production very high

Wholesale trade in natural gas in Poland in 2010 took

place only within the PGNiG group

Wholesale trading remains based exclusively on

bilateral contracts

There is no gas trading on exchanges or through hubs

PGNiG booked almost 100% of capacity at all entry

points to the Polish gas transmission system

Plans to deregulate tariffs for industrial and

commercial customers, and to start trading gas on the gas

Exchange

Retail: Both domestic and industrial prices subject to

regulation

Energy Act 2012

Wholesale: gas is sold exclusively through long-term

bilateral contracts between producers and suppliers

OPCOM has been mandated to set up a gas exchange

Retail: competitive and regulated segments of the market

Almost all of the approx 3 mil consumers purchase gas on

the regulated market

Energy Act 2012: phasing out of the regulated market:

non-household: end of 2014

household: end of 2018

Regulated market dominated by E.ON and GDF Suez

Competitive market (1500 consumers): 37 small suppliers

Export ban lifted recently as a result of infringement

procedure opened against Romania in 2012

Bill to Amend the Geological & Mining Act (15 February

2013)

prospecting no need to obtain a concession requirement

term: 10 to 30 years (currently concessions are

granted for the period of 3 to 50 years)

new and more transparent tender procedure consisting

of three phases: (i) qualification, (ii) tender and (iii)

conclusion of a joint operating agreement;

tender to be initiated by the interested party

the joint operating agreement will be concluded with

newly established state-owned joint stock company –

Narodowy Operator Kopalin Enrgetycznych Spółka Akcyjna

(National Operator of the Energy Fossils - NOKE S.A.)

In order to move from the exploration to the

production phase: investment decision will be required

Farm-out allowed

Bill on Hydrocarbon Taxation

Production:

high-methane gas: PLN 24 / 1000 m3 X gross production of

2Q

other gas: PLN 20 / 1000 m3 and quantity of fossil

exploited during half-year period X gross production of 2Q

Additional tax of:

12.5% ratio of income to qualified expenditures is higher

than 1 but lower than 2), or

25% ratio is higher than 2

Thank you!

Raluca Dirjan

Attorney at Law

[email protected]

+32 2 743 40 41

mailto:[email protected]

mailto:[email protected]

Shale gas presentation final 16 april

Documents

Transcript of Shale gas presentation final 16 april