Shale gas presentation final 16 april

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Shale gas presentation final 16 april

  1. 1. 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
  2. 2. Regulatory Issues upstream environmentalContractual Issues marketing and trading
  3. 3. Ownership regime hydrocarbons - state owned natural resourcesAuthorities in Charge State Treasury Ministry of Environment State Mining Authority Polish Geological Institute Government National Agency for Mineral Resources (NAMR)– RegulatoryAuthority
  4. 4.  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 andproduction according to NAMR: there is no ban on shale gasexploration in the meantime recent protests in North-Eastern countiesof Romania
  5. 5.  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
  6. 6.  Geological and Mining Law 2011 Energy Act 1997 Petroleum Act 2004 Energy Act 2012
  7. 7. Concession & Mining UsufructConcession – Administrative Document• separate for the exploration and production phases• issued by the Ministry of EnvironmentMining Usufruct – Civil Law Contract• exclusive right to explore, develop and produce• entered into with the Ministry of Environment, as proxy for theState Treasury exclusive proprietor of the hydrocarbons (interalia)Petroleum Agreement• grants the right to perform the ‘petroleum operations’• grants a concession right for the state owned productionfacilities• covers exploration, development and production – individuallyor combined• exploration – can be performed based on a non-exclusive permitvalid for max 3 years (cannot be extended)
  8. 8.  entities duly registered in Poland legal person(s) Romanian or foreign foreign legal persons - subsidiary or branch within90 days as of the signing of the Petroleum Agreement
  9. 9.  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
  10. 10.  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
  11. 11.  Statutory Principles:  effective use of the natural resources  transparency  non-discrimination  competition  confidentiality Public tender initiated by the Regulator or anyinterested 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 financialcapability Evaluation of the bids: 15-30 days The winner enters into negotiations of the PetroleumAgreement with NAMR Petroleum Agreement: signed by NAMR and approved byGovernment
  12. 12.  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
  13. 13.  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
  14. 14.  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% ofthe additional revenues incurred as a result ofliberalisation of the gas tariffs
  15. 15.  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
  16. 16. 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
  17. 17. 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 LawEnvironmental Impact Assessment (EIA Directive) Directive 2011/92/EU  no transposing legislation so farWater 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)
  18. 18. Water Framework Directive – Directive 2000/60/EC  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 actsGroundwater 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)
  19. 19. 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 (Dz.U.2010.28.145, as amended)  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 – unified text, as amended)  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)
  20. 20. 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 – unified text, as amended)  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 farEnvironmental Liability Directive – Directive 2004/35/EC  Act of 13 April 2007 on prevention and remedying of environmental damages (Dz.U.2007.75.493, as amended)  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)
  21. 21. Strategic Environmental Assessment – Directive 2001/118/EC (SEADirective)  Government Decision 1076 of 2004Environmental Impact Assessment (EIA Directive) – Directive 2011/92/EU  Government Decision 445 of 2009 (subsequently amended)Water Framework Directive – Directive 2000/60/EC  Water Act 107 of 1996Groundwater Directive – Directive 2006/118/EC  Order of the Minister of Environment 137 of 2009  Government Decision 53 of 2009REACH Regulation – Regulation 1907/2006/EC  directly applicableBiocidal Products – Directive 98/8/EC  Order of the Minister of Environment 1321/280/90 of 2007  Government Decision 956 of 2005IPPC Directive – Directive 2008/1/EC  Government Emergency Ordinance 152 of 2005Industrial Emissions Directive – Directive 2010/75/EU  Not transposed so farMining Waste Directive – Directive 2006/21/EC  Government Decision 856 of 2008
  22. 22. Habitats Directive – Directive 92/43/EEC  Government Emergency Ordinance 57 of 2007Birds Directive – Directive 2009/147/EC  Government Emergency Ordinance 102 of 2010  Government Decision 971 of 2011  Minister of Environment Order 1964 of 2008  Government Decision 1284 of 2007  Government Emergency Ordinance 154 of 2008Seveso II – Directive 96/82/EC  Government Decision 95 of 2003  Government Decision 79 of 2009  Government Decision 804 of 2007Seveso III – Directive 2912/18/EU  Not transposed so farEnvironmental Liability Directive – Directive 2005/35/EC  Government Emergency Ordinance 68 of 2007
  23. 23.  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 andproduction very high Wholesale trade in natural gas in Poland in 2010 tookplace only within the PGNiG group Wholesale trading remains based exclusively onbilateral contracts There is no gas trading on exchanges or through hubs PGNiG booked almost 100% of capacity at all entrypoints to the Polish gas transmission system Plans to deregulate tariffs for industrial andcommercial customers, and to start trading gas on the gasExchange Retail: Both domestic and industrial prices subject toregulation
  24. 24.  Energy Act 2012 Wholesale: gas is sold exclusively through long-termbilateral 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 onthe 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 infringementprocedure opened against Romania in 2012
  25. 25. Bill to Amend the Geological & Mining Act (15 February2013)  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
  26. 26. 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
  27. 27. Thank you! Raluca Dirjan Attorney at Lawr.dirjan@schoenherr.eu +32 2 743 40 41

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