August 25, 2017

Egypt Issues New Law Regulating Gas Market Activities

A new law is issued to liberalize the downstream and midstream segments of the gas chain
of business in Egypt; it is the Gas Market Law No. 196 of 2017 (“Law”) which was officially
issued and published on 1/8/2017. The Law excludes from its application the upstream
segment which will continue to be governed by concession agreements without prejudice to
the provisions of Law No. 20 of 1976 regarding the Egyptian General Petroleum Corporation.

The Law aims at liberalizing the gas market by opening it up to the private sector to
participate in the shipping, transmission, storage, distribution, sale, importation and
marketing of gas. The activities which were monopolized by the government before.
Qualified consumers will be allowed to choose their gas suppliers. Licensed third parties will
be allowed on a non-discriminatory basis to access the gas transmission and distribution grids and the storage and liquefied gas facilities (which are currently owned and run by the

The Law is expected to enhance competitiveness, guarantee non-discrimination between the
gas market stakeholders, as well as prevent monopolistic practices.

Establishing a Regulatory Authority

The Law provides for the establishment of a public body to be the regulator; it is the Gas
Market Regulatory Authority (“Authority”). The Authority shall be responsible for regulating,
licensing and overseeing all gas-related activities. The Authority is particularly competent,
inter alia, to:

  1. Regulate the relationship between all stakeholders in the gas market.
  2. Issue licenses for all gas activities.
  3. Set the mechanism of calculating the tariff for transmission, distribution and usage
    of storage grids and facilities.
  4. Putting the rules of using transmission, distribution and storage grids and facilities
    on a non-discriminatory basis.
  5. Drafting model contracts related to all gas activities.
  6. Handling complaints submitted by stakeholders and resolve it according to the rules
    to be decided by the executive regulations.

The Law prohibits the exercise of any gas-related activity without obtaining a license from
the Authority. A license will be issued, modified, renewed, suspended or cancelled by virtue
of a decision of the board of directors of the Authority.

The Authority is authorized to issue a license for each separate activity for a specified fee
with a maximum amount of 0.1 of US dollars per each Million British Thermal Unit payable in
Egyptian pounds, in addition to the expenses of publishing the decisions issued by the
Authority regarding the licenses.

The executive regulations shall decide the forms, supporting documents and the insurance
to be submitted by an applicant to obtain a license and shall decide the timeframe for
issuing the license as well its duration.

A license may not be assigned without the prior consent of the Authority. Also, the
ownership structure of a licensee may not be changed without the prior written consent of
the Authority.

Gas Market Activities

The Law divided gas-related activities into, (1) Services Activities, and (2) Market Activities.

Service Activities includes the operation of
gas grids and facilities through
transmission, storage, distribution of gas
as well as LNG/Regasification activities.
While Market Activities covers gas
shipping and supply.

For those entities which carry out multiple activities, a separate special purpose vehicle with
independent organizational structure must be established in the following case:

  • an entity would like carry out two activities, one belongs to the Service Activity and
    the other belongs to the Market Activity; and the gas subject to the Market Activity
    is owned by the licensee.

One entity can however carry out two activities in the following 3 cases:

  1. One activity belongs to the Service Activities and the other to the Market Activities,
    and the gas subject to the Market Activity is not owned by the licensee.
  2. If the two activities belong to the Market Activities.
  3. If one of the two activities is not regulated by the Law.
  4. To ensure independence and non-conflict, persons who are responsible for managing and
    operating any of the Services Activities may not participate in a direct or indirect way in the
    Market Activities.

Entities currently carrying out multiple activities are given 5 years to take the procedures
required to comply with the requirement of the Law. This period can be extended to up to
another 3 years by virtue of a decision of the board of directors of the Authority.

Gas Market Participants

Participants in the gas market are those who are licensed to carry out one of the gas
activities as following:

1.Transmission system operator

A license can be granted to one or more transmission system operator (TSO) to operate the
national gas high pressure pipelines grid system. A TSO is required to allow shippers to
access its grid on a non-discriminatory basis for a tariff to be agreed by the Authority. A TSO
is allowed to stop the transmission of the agreed gas quantities in case the shipper fails to
pay the agreed transmission tariff, consumes higher quantities of gas or ships gas with
specifications different than those agreed upon.

2.Distribution system operators

The Law allows several distribution system operators to be licensed. The distribution system
includes the medium and low pressure gas pipelines from the gas entering point to the
delivery point to the consumers. Licensees are required to allow third parties to accesses the
distribution system on a non-discriminatory basis against a fee that is approved by the

3.Regasification facilities operators

A license can be given to a company or more to operate regasification facilities. Licensee is
required to allow third parties to access unused facilities on a non-discriminatory basis for a
tariff to be approved by the Authority.

4.Storage facilities operators

Licensed operators of storage facilities are required to allow third parties to access unused
facilities on a non-discriminatory basis for a tariff to be approved by the Authority. Storage
facilities means the underground and over the ground containers and warehouses of gas in
its gaseous, compressed or liquefied form. It does not however include storage facilities
related to production activities or those used by TSO.

5.Gas shippers

Gas shippers are entitled to use gas grids and facilities by paying their operators a tariff to be
approved by the Authority. They are also allowed to buy or import gas and sell it to local
suppliers or other shippers.

6.Gas suppliers

Gas suppliers are those who are licensed to buy gas from shippers and sell it to end
customers or other suppliers. Gas suppliers are entitled to suspend supplying the gas to
qualified customers in case the latter fails to pay the agreed tariff or consumed amounts
above the agreed quantities. The executive regulations shall provide for the procedures for a
supplier to suspend supplying the gas to qualified customers.

7.Qualified and Unqualified consumers

Qualified customers are those entitled to choose their own gas suppliers through direct
agreements specifying gas prices and quantities. Unqualified customers are those who
cannot choose their suppliers and are supplied by gas according to the rules set by the
government against a pre-specified tariff approved by the Cabinet.

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