News

A license for trading natural gas with foreign countries – the first step to start operations.

Kacper Skalski Legal Counsel, Partner
25 February 2016
A license for trading natural gas with foreign countries – the first step to start operations.

The natural gas market, following the energy market, is undergoing continuous but slow liberalization. Under Polish conditions, natural gas trading with foreign countries is subject to strict legal regulation, and the road to starting the business is quite complicated and time-consuming.

The business of trading in natural gas with foreign countries, due to the strategic importance of this resource for the state, can only be carried out on the basis of a license issued by administrative decision, by the President of the Energy Regulatory Office. The regulations specifying the requirements necessary for the applicant to meet are set forth in Article 35 of the Energy Law. There are, of course, exceptions to the need for a license, and this is the case, among others, when the annual value of turnover does not exceed the equivalent of €100,000. The requirements for applicants are regulated in detail in the aforementioned article of the Energy Law. Among them, an issue affecting the formation of the procedure for obtaining a license is the obligation to determine how to maintain mandatory stocks of natural gas, in accordance with the provisions of the Act of February 16, 2007 on Stocks of Crude Oil, Petroleum Products and Natural Gas and the Principles of Handling Situations of Risk to the State’s Fuel Security and Disturbances in the Oil Market.Due to the necessity of having an exemption from the obligation to store natural gas, the procedure for obtaining a concession for trading natural gas with foreign countries will, in practice, consist of three stages: first, obtaining a promise of a concession for trading natural gas with foreign countries, then fulfilling the obligation related to maintaining mandatory natural gas stocks by obtaining an exemption from the obligation to store natural gas, and after obtaining this exemption, applying for a concession for trading natural gas with foreign countries.

The duration of the concession procedure depends on a number of factors. The very procedure of granting a promise and later the concession itself, is aimed at verifying whether the applicant, has the necessary financial and material resources, as well as the knowledge, necessary to conduct this type of business. The proceedings are initiated on application, which should include information about the planned activity and characteristics of the entrepreneur. It is primarily about, proving with appropriate documents, the possession of sufficient financial security, competence and other requirements of the Energy Law, such as: information on no criminal record from the National Criminal Register issued with respect to the applicant – as a collective entity, and separately the members of its board. If the applicant is a citizen of, or based in, one of the member states of the European Union, the Swiss Confederation and the member states of the European Free Trade Agreement (EFTA), the information on criminal record should come from the register of the relevant state and be provided, together with a sworn translation and an apostille clause. As of May 19, 2016, the Energy Law will also allow applicants who are domiciled in Turkey to apply for the license in question.

The applicant should specify the anticipated volume of natural gas imports from abroad, in advance for a period of three years, and include in connection with it, a plan for financing business activities.

An applicant whose business will not exceed 100 thousand customers and whose imports of natural gas during the calendar year will not exceed 100 million cubic meters, according to Article 24 paragraph 5 of the Law on Stocks, may apply for an exemption from the obligation to maintain mandatory stocks – the basis for issuing an exemption decision, will be to obtain a promise of a license to trade in natural gas with foreign countries. If the applicant does not meet the conditions for exemption, it is obliged to indicate the method of maintaining mandatory stocks, and the procedure for obtaining a license for trading natural gas with foreign countries is carried out without first applying for a promise. The competent authority to grant the exemption is the minister in charge of energy, who should also be informed in each case of exceeding the volumes entitling to exemption from the obligation to store natural gas.

The promise of a concession is granted for a minimum period of 6 months, while a concession is granted for a fixed period of not less than 10 years and not more than 50. In practice, due to the fact that Poland’s current energy policy will be in force until 2030, the ERO President does not grant concessions whose term exceeds this period. During the period of validity of the promise, the granting of a concession for the activity specified in the promise or its modification may not be refused, unless the factual or legal status stated in the application for the promise has changed.

Facts cited by the applicant during the proceedings, may be verified by the ERO President. This is combined with a prolongation of the process of obtaining a license, so the more carefully the application is prepared, the faster the Office prepares a decision. The applicant must also take into account the costs of the proceedings, including PLN 98, for the issuance of a promise of a license, and PLN 4,244 in stamp duty for the issuance of a decision on granting a license to trade in natural gas with foreign countries.

Conducting business activity in liquid fuels trading, including trading in liquid fuels with foreign countries, without a required license is subject to a fine ranging from PLN 200,000 to PLN 1,000,000, administered by the President of the ERO, as stipulated in Article 56(1)(12a) and (2d)(3) of the Energy Law, and conducting business activity without a required license is also a misdemeanor punishable by restriction of liberty or a fine.

In our experience, the process of obtaining a license to trade in natural gas takes about 3 months on average. It is also worth noting that merely obtaining a license for trading natural gas with foreign countries is only the first step to actually starting a business of trading natural gas with foreign countries.

Legal counsel Kacper Skalski
lawyer Magdalena Żurowska

Related

A license for trading natural gas with foreign countries – the first step to start operations.
25 February 2016

The natural gas market, following the energy market, is undergoing continuous but slow liberalization. Under…

Kacper Skalski Legal Counsel, Partner
Do you want to receive news?
Subscribe to Newsletter