The Energy Regulation and Markets Review - Stikeman Elliott

Venezuela
The MEP fixes the prices for final consumers of gas hydrocarbons jointly with the Ministry
of Commerce. 20 The MEP is empowered to determine the prices of hydrocarbon gases
from the production and processing centres, taking equitable principles into account. 21
Only Enagas may calculate the basis for the determination of these tariffs. The tariffs for
small consumers are the sum of the price of acquisition of gas, the transport tariff and
the distribution tariff. 22
Tariffs for storage, transportation and distribution services must be fixed subject
to certain principles and guidelines. Such tariffs must guarantee efficiency of operations
and sufficient income to satisfy adequate operational and maintenance costs, as well as to
cover taxes, depreciation, amortisation of investments, and a reasonable profit. 23
Profitability has to be reasonable compared to the profitability of other activities
with similar risks and in light of the efficiency of the services provided. Tariffs must also
take into account the specifics of the services provided, such as geographical location,
distance between sale and production points, and other conditions to be defined in the
regulations. Tariffs should allow the lowest possible cost for consumers while at the same
time assuring a stable supply for the market. 24
Companies marketing methane are entitled to request from the MEP the approval
of price agreements with their clients (previously agreed by the parties) provided that the
contracts need to have been entered into to supply gas for industrial use, for a specific
term and for consumers that require a long-term price scheme. 25
ii Regulated activities
Upstream activities: petroleum
On 13 November 2001, President Chavez issued the Hydrocarbons Law. 26 The 2001
Hydrocarbons Law was partially amended by the National Assembly on 16 May 2006. 27
Pursuant to the Hydrocarbons Law, oil production activities (‘primary activities’) 28 can only
be carried out by the state, companies wholly owned by the state, or joint venture or mixed
companies (‘JVs’) in which the state retains control of its decisions through the ownership
of more than 50 per cent of its capital. 29 The Hydrocarbons Law considers the exploration
for oil, production, gathering, transportation and initial storage as primary activities.
20 Resolution 450, dated 6 November 1998, contains the specific formulae to determine methane
prices for domestic, commercial, industrial and electric generation customers.
21 Id, Article 12.
22 Id
23 Article 13 of the Gas Law.
24 Id.
25 Article 3 of Resolution 450, dated 6 November 1998.
26 Decree-Law 1510 published in the Official Gazette No. 37,323 dated 13 November 2001.
27 Originally published in the Official Gazette No. 38,443 dated 24 May 2006, republished with
corrections in the Official Gazette No. 38,493 dated 4 August 2006.
28 Pursuant to Article 9 of the Hydrocarbons Law, ‘primary activities’ include exploration of oil
fields, extraction of oil in its natural state, and initial recollection, transportation and storage.
29 Article 22 of the Hydrocarbons Law.
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