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Natural gas transport in Colombia: unprofitable

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Hemberth Suarez's picture
Founding Managing Partner , OGE Legal Services

Hemberth is an attorney and partner at OGE Legal Services. He is a Master's Degree in Renewable Energies. He is a specialist in electricity and gas regulation, energy mining law, domestic...

  • Member since 2020
  • 10 items added with 11,178 views
  • Jan 12, 2021

Since January 5, 2021, natural gas marketers cannot claim profit or margin for developing the sale of natural gas transportation capacity in the secondary market. This was established in the new regulation issued for the commercialization of natural gas transportation capacity by the Energy and Gas Regulation Commission. 

The wholesale gas market in Colombia has two sub-markets. A primary market and a secondary market, in both of which only two products are traded, which are the supply of natural gas and the capacity to transport natural gas. In these markets, agents with different profiles participate, one of which is the profile of the natural gas marketer, whose essence is to intermediate and seek to obtain a margin or profit from that intermediation, especially if it is an independent marketer. Well, this is no longer the case and, since January 5, 2021, marketers cannot claim profit or margin for developing the sale of natural gas transportation capacity in the secondary market.

As a general rule, a trader of any product obtains a profit from its intermediation work, so it is not enough that the negotiation is onerous, but also that it allows him to register a margin. In other words, the final negotiation must include the purchase price of the product plus a reasonable profit. This is the general rule. However, as every rule has an exception, in the case of natural gas we find it for the commercialization of transportation capacity.

The exception is based on the fact that, although the Civil and Commercial Code regulates the basis of relations derived from supply, purchase and transportation contracts entered into by private parties, when the provision of a public service, such as natural gas, is regulated by the Government through the regulations issued by authorities such as the CREG, the conditions of gas supply or transportation contracts must be subject to the provisions of the resolutions issued by the CREG.

In that sense, the CREG defined that the activity of fuel gas marketing is the activity of buying and selling fuel gas for onerous title in the wholesale market and its sale to other operations in such market or to the final users. Thus, it is clear that marketing must be onerous.

However, the simple fact that marketing is onerous does not mean that there is always a profit or margin.  At least, that is one of the conclusions drawn from a new rule issued by the CREG, in which it indicated that the maximum price for firm natural gas transport capacity contracted in direct negotiations on the secondary natural gas market will be the same as that negotiated on the primary gas market for the section or group of pipelines on which the natural gas transport capacity is contracted. It is therefore clear that no profit can be agreed on these transactions.

So, are the transactions of transportation capacity in the secondary market still onerous? Of course, they are, they are still onerous. But from now on it is not allowed to include a reasonable profit in that price.



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