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Peru: Regulation to optimize the use of natural gas and creation of the natural gas manager

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In brief

On 19 May 2021, Supreme Decree No. 012-2021-EM was enacted, which approves the Regulation to Optimize the Use of Natural Gas and creates the Natural Gas Manager (“Regulation“) and modifies the Regulation of the Secondary Market of Natural Gas approved by Supreme Decree No. 046-2019-EM.

Here, we share the most relevant aspects of the Regulation:

  1. It applies to agents involved in: (i) the primary market by contracting natural gas supply and natural gas pipeline service; and (ii) the Secondary Market.
  2. The “Natural Gas Manager” (“Manager“) is created, whose functions are as follows:
    • Optimize dispatch operations in the natural gas market, referring to the volumes and use of natural gas transport capacity.
    • Operate, maintain and permanently update the information system of the Primary and Secondary Market of Natural Gas.
    • Develop means and mechanisms to collect, verify, organize and preserve information on the Primary and Secondary Natural Gas Market.
    • Publish the operational information of the natural gas market through the electronic platform that is implemented. Confidential information of market participants is not subject to publication.
    • Propose provisions aimed at promoting the best use of natural gas and the infrastructures involved.
    • Estimate the availability of natural gas volumes at the national level in the primary market.
    • Estimate the availability of domestic pipeline capacity in the Primary Market.
    • Manage the electronic market for natural gas volume and/or capacity transfer auctions (MECAP in Spanish).
    • Propose alternative mechanisms for transfers of surplus volumes and/or capacity to transport natural gas in the Secondary Market.
  3. The Directorate General of Hydrocarbons (DGH) will directly exercise the functions of the Manager, which will be subsequently delegated through public procedures to a private entity with recognized experience and solvency for this purpose.
  4. In relation to the estimation of the demand and supply and/or transport capacity of natural gas in the Primary Market, the Regulation provides the following:
    • The Manager estimates the availability of volumes and capacity of natural gas pipeline transportation nationwide in the short, medium and long term, according to the procedure established by the DGH.
    • Information on the volumes and capacity of transport by natural gas pipelines contracted and actually consumed shall be collected and managed.
    • For the calculation of availability, the Manager estimates the demand and supply of all consumers, producers and transport concessionaires, on the basis of the nominations made and capacities contracted by the various market agents, including the export of natural gas, as well as the requirements and/or extensions of offer of future projects.
    • The Manager publishes weekly, monthly and annually, information on the volumes of natural gas actually consumed and contracted in the Primary and Secondary Market, as well as the availability of natural gas and transport capacity.
    • Agents involved in the natural gas market are required to provide the information required by the Manager.

Likewise, the norm that approves the Regulation incorporates modifications to the Regulation of the Secondary Market of Natural Gas, approved by Supreme Decree No. 046-2010-EM, highlighting the following:

  1. The inclusion of a mechanism for transparency of transactions in the MECAP
  2. New award criteria for Secondary Market auctions
  3. The designation of the Manager as the manager of the MECAP
  4. Offering consumers having the right to transfer contracted natural gas transmission volumes or capacities not used on the Secondary Market, through the MECAP or other envisaged mechanism; contracts may not contain clauses that limit or condition the exercise of this right.

In the case of contractual provisions that make the exercise of this right subject to prior authorization or agreement by the producer or transport concessionaire, such transfers must be approved by the producer or transport concessionaire until the start of the relevant auction on the Secondary Market. The non-pronouncement of the producer or concessionaire of transport within the indicated term is considered as tacit approval.

The DGH must approve within a period of no more than 90 working days, that is, until 28 September 2021: (i) the operational procedures for the application of the functions of the Manager; and (ii) an operational procedure for the operation of the Secondary Market, including an alternative auction mechanism with notarial faith, until the MECAP computer platform is implemented.

Until the operational procedure enters into force, operations in the Secondary Natural Gas Market will be carried out through bilateral agreements, after which they must be adapted to the provisions of the procedure.

We hope this information is relevant to you and your company. If you need to delve into any particular aspect of the standard, do not hesitate to contact us.

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Author

Ines Vazquez is a partner in Estudio Echecopar. Prior to joining the Firm, she was the head of Latin America Power's Legal Department for two years, during which she gained wide experience and was exposed to transactions in multiple jurisdictions. She has worked on privatization and concession procedures in the electric power sector for private clients, as well as in bidding processes of public services concessions in general. She also has a solid background in corporate law, mergers and acquisitions, financing, and has participated in several acquisition transactions and sale of companies, assets and shares participations, including mergers, spin-offs, reorganizations and other structures, both domestic and international. Additionally, Ines has contentious and non-contentious construction practice based on domestic and international arbitration, advising both private and state owned companies.

Author

Claudia Cruces is a lawyer with a focus on power regulation and renewable energies. She has participated in bidding process for the concession of public services, projects and power purchase agreements in the sector. Also, has advised several private companies and public entities regarding the analysis of the regulations. She has also developed practice in national and international arbitrations in power matters.
She is also experienced in mergers and acquisitions, financing, and has participated in the acquisition transactions and sale of companies, assets and shares participations, including mergers, spin-offs, reorganizations and other corporate structures in the sector.
She has advised private companies in the development and operation of generation, transmission and distribution activities. As part of the advice, she has accompanied the clients in procedures before the authorities for the granting of the permits; sanctioning procedures, tariff procedures and controversies. As well, she has experience structuring and negotiating power purchase agreements, construction agreements, operation and maintenance agreements, and transmission agreements.

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