These regulations govern activities subject to the system in the Kingdom, which include Transfer, processing, Parceling, storage, local distribution, aggregation, marketing, and Sale related to the concerned hydrocarbon materials.
When the activity subject to the system includes a part of a facility that conducts other activities not subject to the system, the activity subject to the system shall be governed by the Gas Supply and Pricing System and the regulations and executive controls as if it were established or managed separately from the other activities not subject to the system.
When providing storage services independently, the facility owner must obtain a license.
1-2 Facilities Subject to the System
Facilities subject to the system are establishments set up to carry out activities subject to the system, and the licensee must:
• Establish the facilities in accordance with the applicable regulations and standards adopted by the Ministry from time to time.
• Operate all facilities in a manner that is safe and efficient.
• Make special arrangements to provide services to third parties.
• Schedule receipt and delivery based on the approved procedures.
• Cooperate with other licensees to balance network loads and allocate capacity among the parties benefiting from the service.
• Carry out necessary maintenance and development of the facility.
• Develop long-term plans for the utilization and expansion of the facility.
• Establish operational controls to maintain the safety of operations during periods of service disruption.
• Study the future needs of facilities resulting from expected changes in the supply and demand for the concerned hydrocarbon materials.
As part of the License application procedures, the License applicant must specify the capacity of each sector in the relevant facility subject to the Law, ensuring that this specification includes daily, monthly, seasonal, or any other changes.
The Licensee must notify the Ministry of any significant changes in capacity, the reasons for the change, and the timeframe during which the change in capacity will occur.
The Licensee must grant the right to use the capacity to third parties in accordance with the following:
• The right to use the capacity for third parties shall be within the limits of the capacity available to the Licensee.
• The available capacity mentioned in the previous paragraph refers to unused capacity or capacity not subject to exclusive usage rights.
• Third parties are not allowed to benefit from the right to use the capacity except through written contracts concluded with the Licensee.
Third parties and potential third parties are granted the opportunity to benefit from the right to use the capacity and the services provided by the facility subject to the Law under economic and operational conditions that are no less favorable than the terms and conditions applicable to the Licensee or its affiliated entity for that capacity or services.
The Licensee must respond to requests from third parties and potential third parties to benefit from the right to use the capacity and obtain the service within a reasonable timeframe. If these requests are denied, the Licensee must notify the third parties or potential third parties of this along with the reasons, and the Licensee is required to provide the Ministry with proof that the capacity or other capabilities are not available to provide the right to use the capacity or the requested service.
If any Licensee with available production capacity refuses to provide a service to a third party or potential third party, or offers the service in a manner that involves discriminatory treatment, the affected party may request the Ministry's intervention.
After consulting with each party, the Ministry shall decide on all outstanding matters related to the use of capacity and the services and the payment of their costs.
4-1 Connection between facilities subject to the Law
The Licensee must allow the connection between its networks and other facilities under the following conditions:
• There must be sufficient production capacity to provide the requested usage right.
• The connection must be technically feasible.
• If the Licensee decides that the connection to its facility is not feasible, it must notify the Ministry of its refusal to connect, stating the reasons that led to this refusal.
• After consulting with each party, the Ministry shall decide on all matters related to the connection of facilities subject to the Law.
4-2 Guaranteed and Intermittent Service
The Licensee of a facility subject to the Law must offer its services in a guaranteed or intermittent manner.
Each facility subject to the Law must define and publish the procedures through which third parties or potential third parties can request guaranteed or intermittent service.
The Licensee must regularly provide the Ministry and potential third parties with the capacity of each facility, the amount of capacity subject to its exclusive use or existing contracts for guaranteed services, and the amount of uncontracted capacity and the duration for which it can be offered as a new guaranteed or intermittent service.
For capacity subject to a contract or the exclusive use of the Licensee, the Licensee must publish information indicating the name of the contracting entity, the amount of capacity reserved for it, and the duration of the contract.
The Licensee must also provide the Ministry with copies of all requests for service and all contracts for guaranteed and intermittent services.
4-3 Network Capacity Allocation
Each Licensee must establish the terms and conditions for reserving capacity, balancing operational loads, and allocating capacity for each facility subject to the Law, and obtain the Ministry's approval for that.
The Ministry and the Licensee shall periodically confirm or amend those terms and conditions applicable to its facilities subject to the Law.
Each Licensee must establish operational controls to ensure the safety of its facilities subject to the Law, addressing operations that occur during normal working days, and clarifying the rights, obligations, and procedures for the network operator, the Licensee, and third parties during service disruption periods.
Each Licensee must establish provisions for supplies and load distribution for each facility subject to the Law, and a load distribution schedule must be established to cover service disruption periods due to supply shortages, loss of demand, or loss of network capacity.
4-4 Exclusive Use
The Licensee of a facility subject to the Law may apply to the Ministry for permission to use the capacity of that facility exclusively for a specified period, and the Minister may grant that right, determining the conditions governing it at the Ministry's discretion.
If the Licensee contracts at any time during the exclusive use period to provide services to an affiliated company or third parties, the right to exclusive use of the entire capacity of the facility subject to the Law shall be deemed null and void, and all other provisions stipulated in these regulations regarding the rights of third parties to use the capacity shall come into effect.
In the case of granting exclusive use to a Licensee for a local distribution network for supplying dry gas to serve a specific geographical area, the Licensee may not unreasonably refuse to provide service or supplies to any end consumer who makes a reasonable request for dry gas supplies.
After consulting with each party, the Ministry shall decide on all outstanding matters related to exclusive use.
4-5 Capacity Increase
Increase in capacity at the request of the Licensee
If the Licensee wishes to increase the capacity of a facility subject to the Law, it must submit a request to the Ministry for a License amendment in accordance with clause 3-12 of these regulations.
Increase in capacity at the request of third parties
If a third party or potential third party submits a request to a Licensee of a facility subject to the Law for services and this is not possible due to insufficient capacity, the third party or potential third party may request the Licensee to increase the capacity of the facility subject to the Law to accommodate the requested service.
The Licensee of a facility subject to the Law must respond to written requests within sixty (60) days and provide a preliminary proposal for the tariff and the start date of service for the capacity increase, or the specific reasons justifying the formal rejection of the request.
If the Licensee agrees to the request of the third party or potential third party to increase capacity, it must provide a preliminary proposal for the tariff and the start date of service, and submit a request to the Ministry for a License amendment in accordance with clause 3-12 of these regulations.
If the Licensee rejects the request for capacity increase submitted by a third party or potential third party, that party may refer the matter to the Ministry for review and action.
If the matter is referred to the Ministry, both the Licensee and the third party or potential third party must submit their views to the Ministry for review, detailing each party's position on the increase of capacity of the facility subject to the Law, and including details of the technical and economic aspects of the proposed capacity increase. The third party or potential third party must also notify the Ministry of its readiness to contribute to the necessary capital for that.
After review, if the Ministry finds that the increase in capacity of the facility subject to the Law is technically and economically feasible and in the interest of the Kingdom, the Ministry has the right to determine the appropriate tariff and terms and conditions for expanding the facility subject to the Law and issue an Order to the Licensee to increase the capacity of the facility subject to the Law in accordance with clause (6) of Article Four of the Law.
If the Minister decides that the capacity increase is not justified, the Licensee and the third party or potential third party shall be notified of the decision, and all procedures related to this matter shall be halted.
The Licensee, upon receiving the Order for capacity increase from the Ministry, must submit a request to the Ministry for a License amendment within thirty (30) days, including all essential details related to the capacity increase.
If the Licensee does not agree to the capacity increase, it has the right to appeal the Ministry's decision in accordance with Article Sixteen of the Law and clause Nine of these regulations.
It is required that each facility subject to the system, which is not considered an independent network or has not been granted exclusive usage rights under its specific license, has a list of tariffs that detail the services offered and the procedures through which third parties or potential third parties can request those services and the specific tariffs for each.
The Ministry adopts the applicable tariffs and terms and conditions related to the right of the third party to use the capacity and services offered to any third party.
Each facility subject to the system must present tariffs for guaranteed and intermittent services, except for facilities that grant exclusive usage rights for the duration of their validity.
5-1 Determining the Tariffs for the Main Gas Network and its Connecting Facilities
The license applicant submits proposals for service tariffs to the Ministry as part of the application for licenses for the facilities included in the main gas network and its connecting facilities, with the necessity of attaching all supporting information and calculations used in determining the proposed tariff.
Tariffs are calculated based on the cost of the service, including a return rate that corresponds to the value of the assets used.
5-2 Determining the Tariffs for Local Distribution Networks
The licensee and the applicant for local distribution network licenses submit proposals to the Ministry regarding service tariffs as part of the applications for licenses, with the necessity of attaching all supporting information and calculations used to calculate the proposed tariffs.
The Ministry then determines the appropriate tariff levels for the relevant local distribution network and announces the final decision regarding the tariff.
5-3 Determining the Tariffs for Independent Networks
A potential third party may apply for service from the holder of an independent network license.
Negotiations take place between the licensee and the potential third party regarding the terms and tariffs of the services of the facility subject to the system classified as independent networks, based on the cost of the service.
Upon successful negotiations, the licensee submits a copy of the signed service contract to the Ministry.
If negotiations continue for at least ninety (90) days without success, and the parties involved do not reach an agreement regarding usage and tariffs, the potential third party may submit a request to the Ministry to determine the tariff.
The Ministry collects and studies what the parties involved provide in this regard, reviews the contracts concluded between the licensee and third parties, and examines the basis used in determining the tariffs for similar services and facilities subject to the system within the Kingdom. Based on this, the Ministry determines the relevant service tariffs.
If the matter is referred to the Ministry and it determines the tariff, the licensee and the potential third party must conclude a service contract that complies with the provisions approved by the Minister.
5-4 Updating the Tariff List
The tariff approved by the Ministry is valid for a period of no less than two years and no more than five years.
The licensee or the Ministry may initiate the procedure to update the tariff at any time. The Ministry may review the tariff at any time it sees changes in the activity subject to the system that necessitate changing that tariff.
Regardless of the above, the tariff is updated whenever the license is amended due to an increase in capacity or modification of the facility approved by the Ministry.
Future tariff modifications may not be made to offset revenue increases or decreases during previous tariff periods.
The licensee must submit a revised tariff list at least seventy-five (75) days before the expiration of the current tariff list. If the licensee fails to submit a revised tariff list in a timely manner, the Ministry will send an order to the licensee to submit that list.
Within seven (7) days after submitting the revised tariff to the Ministry, the licensee must publish an announcement regarding the tariff modification, adhering to the form and content specified by the Ministry when publishing that announcement, and must provide proof of publication to the Ministry within a reasonable time.
The licensee must submit an information memorandum to the Ministry by the date of the aforementioned publication, including the information specified by the Ministry regarding the request to modify the tariff, with sufficient detail for the parties involved to evaluate the proposed tariff modification. The Ministry, when requested, will provide this information memorandum to the parties involved that meet the conditions specified by the Ministry.
The parties involved are granted a period of thirty (30) days from the date of publication of the announcement to review the information memorandum and submit their comments in writing to the Ministry.
The Ministry, within sixty (60) days of receiving proof of publication, will review the request and the materials submitted by the parties involved and send a notice of the revised tariff list to the licensee.
The licensee must submit periodic reports to the Ministry as specified in this article and other articles in these regulations. These reports must be sent to the Ministry electronically and in printed form or as determined by the Ministry.
1-7Monthly Reports
The licensee shall submit monthly reports to the Ministry covering the aspects mentioned below:
- Quantities purchased or sold of the concerned hydrocarbon materials.
- Quantities transported, processed, fractionated, or stored of the concerned hydrocarbon materials.
- Contracts concluded by the licensee regarding the provision of services according to the license.
- Changes in capacity.
- Accident and security statistics.
- Obligations stipulated by the law, these regulations, executive controls, standards, and official directives in the Kingdom.
- Any other matters the Ministry deems necessary from time to time.
7-2 Annual Reports
The licensee shall annually submit to the Ministry the information outlined below:
- Monthly summary of the information mentioned in paragraph 7-1 above.
- Audited accounts for the previous year.
- Ten-year forecasts for the supply and demand of the concerned hydrocarbon materials in the licensee's area of operations.
- Three-year forecasts for maintenance shutdowns or capacity changes.
- Commercial feasibility forecasts for the different facility units as requested by the Ministry.
The licensee must prepare the reports submitted to the Ministry and maintain its accounting books in a manner that clearly distinguishes between activities subject to and not subject to the law. This requires the preparation of separate accounts for revenues, expenses, assets, and liabilities of activities subject to and not subject to the law.
1-8Price of the concerned hydrocarbon materials
The Supreme Council approves the sale and consumption prices of the concerned hydrocarbon materials in the Kingdom.
The Committee proposes pricing plans based on the Ministry's recommendation and submits its proposals to the Minister.
The Committee studies the periods during which the pricing plans are effective and submits its recommendations to the Minister for approval.
2-8Local marketing and sale rights
Regarding the quantities produced by a company of the concerned hydrocarbon materials, which are decided to be consumed in a licensed facility affiliated with it or an affiliated entity approved by the Ministry (self-use), that company retains the ownership and sale rights of these hydrocarbon materials to that facility.
If a company has the right to sell quantities of the concerned hydrocarbon materials that enter the main gas network as indicated in the previous paragraph, and has entered into contracts to sell the concerned hydrocarbon materials to the self-use facility, and faces a shortage in demand for the concerned hydrocarbon materials, Saudi Aramco will not be obligated to purchase the surplus production.
Saudi Aramco is obligated to purchase all other quantities of the concerned hydrocarbon materials that enter the main gas network, provided that these hydrocarbon materials are subject to an approved field development plan by the Ministry.
Saudi Aramco must contract to purchase the concerned hydrocarbon materials under commercial terms and conditions that take into account Saudi Aramco's current and future commitments at the time.
The concerned hydrocarbon materials are sold in local markets at the prices as stated in Article 8-1 above.
The purchase price of the concerned hydrocarbon materials at their entry point into the main gas network shall be equal to the sale price of their equivalent concerned hydrocarbon materials in the local market as determined by the Supreme Council, minus service tariffs and other fees imposed by the government that are paid or incurred on behalf of the third party, or as approved by the Ministry.
Companies may apply for a license to establish an independent network aggregation entity. The Ministry sets the qualification criteria for a company to undertake this role.
8-3 Allocation of gas, ethane, and natural gas liquids
The Ministry compiles supply and demand forecasts submitted by licensees and other government entities, and prepares long-term periodic forecasts for the supply and demand of each of the concerned hydrocarbon materials in the Kingdom.
Each licensee must submit an annual report to the Ministry on its assessment of the supply and demand, at that time and in the future, for the concerned hydrocarbon materials in its area of operations.
The Ministry, taking into account the supply and demand forecasts it receives, prepares a report that includes prioritizing the exploitation of feedstock types and the concerned hydrocarbon materials to serve the developmental goals in the Kingdom, then submits these proposed priorities to the Committee.
The Ministry is responsible for applying the allocation standards (allocation of gas, ethane, and its liquids), according to the plan determined by the Supreme Council from time to time, based on the standards set by the Committee and approved by the Minister.
The Ministry exercises its authority concerning the approval of licenses and their amendments in light of the dry gas, ethane, and natural gas liquids allocation standards followed in the Kingdom as one of the influencing factors. The dry gas, ethane, and natural gas liquids allocation standards are applied to all license applications, including the self-use of the concerned hydrocarbon materials.
8-4 Sales to affiliated companies
Ministry approval must be obtained for all contracts and arrangements between any entity and its affiliated entities concerning all transactions related to activities subject to the law.
If a friendly settlement cannot be reached for any dispute that may arise between the Ministry and any licensee, or between two or more licensees, it may be referred to the Gas Industry Dispute Resolution Committee established by the Supreme Council as outlined in Article Sixteen of the Law.
The existing projects subject to the Law shall continue their operations in accordance with the Law and these regulations. It is considered that a temporary license has been granted to the existing projects subject to the Law, and they must comply with the provisions of the Law and these regulations.
Any existing project subject to the Law must grant the right to use its facility capacity and provide services in accordance with these regulations. The parties wishing to obtain those services must submit a written Claim to the existing project subject to the Law and deliver a copy of each Claim to the Ministry. The existing project subject to the Law must respond to those Claims within one month.
The existing project subject to the Law may refuse to provide the requested service in the event of insufficient capacity or technical obstacles. In this case, the existing project subject to the Law must provide written reasons for the refusal to the party requesting the service, with a copy sent to the Ministry.
Within four (4) months from the date of issuance of these regulations, the Ministry shall issue a tariff for transportation, processing, parceling, and storage services in the main gas network.
The existing projects subject to the Law must submit appropriate Claims to the Ministry to obtain licenses within eight (8) months from the date of issuance of these regulations, provided that these Claims include information about the gas and natural gas liquids related to them and their marketing activities, including:
• Identification of the facilities for which exclusive usage rights are requested.
• Tariffs for all facilities that are not used exclusively.
• Annual statistics on quantities, prices, sales, imports, and exports.
• Geographic location and specific characteristics of the facilities.
• Terms and conditions of contracts for the purchase and sale of the relevant hydrocarbons and provisions for the purchase and collection of protected materials that are in effect on the date these regulations come into force.
• Any other information related to gas and natural gas liquids requested by the Ministry.
After submitting these Claims, the Ministry shall issue the necessary licenses within a period of six (6) months, and the Ministry may license specific facilities on an accelerated schedule whenever it deems it in the interest of the public.