Arabic
Issued by Ministry of Energy Decision 3664
Based on article 11 of the Energy Supply Law issued by Royal Decree D/80 dated 4 Jumada Al-Thani 1444 [28 December 2022], which stipulates that: “The Minister shall issue the regulations and the allocation regulation,” and in accordance with the regulatory role of the ministry, this regulation aims to regulate the activities of natural gas and its liquids, and specify the conditions and requirements for obtaining licenses for these activities and the regulatory, technical, and procedural requirements that a licensee must comply with.
Chapter One
General Provisions
Article 1
Definitions
1․ Terms and phrases provided in this regulation have the meanings assigned in article 1 of the Energy Supply Law, unless a specific definition is provided for them in this regulation.
2․ The following terms and phrases—wherever they appear in this regulation—have the meanings assigned to each of them, unless the context requires otherwise:
Regulation:
The Regulation of the Activities of Natural Gas and Its Liquids
Committee:
The committee for examining violations referred to in article 9 of the law.
International industry standards:
The specifications, practices, and procedures recognized in the energy industry internationally, under conditions and circumstances similar to those related to business in the Kingdom.
Person:
Any natural or legal person.
Third party:
A person benefiting or who may benefit from the activities of licensees, whether that beneficiary is a licensee, consumer, or others.
Applicant:
An applicant for a license to be issued, amended, extended, or disposed of.
Disposal of a licence:
The creation of rights over a license or transferring a license to another person by assigning, selling, or disposing of it in any other form.
Dry gas:
It mainly consists of methane, and may include some ethane and small amounts of heavier hydrocarbons and others. It is commonly referred to as sales gas.
Activity:
Any activity related to natural gas and its liquids that is subject to the law, including: Transportation, processing, fractionation, gas purification, collection, storage, local distribution, import, export, sale, and the construction, ownership, and operation of networks and facilities of natural gas and its liquids.
Facilities of natural gas and its liquids:
Any facility that is constructed, prepared, or equipped for the purpose of practicing one or more activities, including all installations and assets that are being constructed or converted to ensure the application of international industry standards, and any related fixed assets required for operational processes.
Transportation:
Delivering natural gas and its liquids—after compressing, liquefying, or regasifying them via pipelines, tanks, or other means—from a collection point to a delivery point.
Gas purification:
The removal of water, carbon dioxide, sulfur compounds, or any other impurities, elements, or compounds for the purpose of purifying gas, in gas plants or gas purification plants
Processing:
The separation of dry gas from natural gas liquids.
Fractionation:
The separation of ethane and other natural gas liquids into individual components, such as: Ethane, propane, butane, pentane, and heavier hydrocarbons.
Main gas network:
The currently existing main gas network, and any future expansion of it, which is an integrated network for transporting natural gas and its liquids, and distributing them to a third party and local distribution networks.
Collection and delivery points:
Points located at measurement meters, pipe junction connections (flanges), or others, which define the responsibility between one activity and another, one licensee and another, one facility and another, or a licensee and an end consumer.
Independent network:
An integrated network for transporting natural gas and its liquids, and distributing them to a third party and local distribution networks that are not connected to the main gas network.
Collection:
The collection of natural gas and its liquids from local producers or importers at the collection points of the main gas network for transportation and distribution purposes.
Sale:
The sale of natural gas and its liquids by local producers or importers to the main gas network or independent networks, in cases where the sale occurs at collection points.
Storage:
The receipt and keeping of natural gas and its liquids in designated facilities until they are delivered.
Local distribution:
Supplying consumers with natural gas and its liquids via a local distribution network, tanks, or any other means.
Liquefaction:
The process of converting gas from a gaseous state to a liquid state.
Regasification:
The conversion of liquefied gas from a liquid state to a gaseous state.
Local distribution network:
A network that receives natural gas and its liquids and delivers them to consumers, which requires the installation of a pipeline network, pressure reducing stations, and other facilities within a specific geographical area in a region or industrial city, and the delivery of gas to measurement meters of consumers under appropriate pressure.
Exclusive right to use:
The right of a licensee to use the full capacity of any facility of natural gas and its liquids for a specified period.
Capacity:
The handling ability of a facility of natural gas and its liquids.
Abandonment:
The relinquishment by a licensee of a specific facility for an activity of natural gas and its liquids.
Service commencement:
The date of releasing natural gas and its liquids into the facility.
Service fees:
The compensation received by a licensee from a third party for providing the service of transporting or locally distributing natural gas and its liquids.
3․ Terms and phrases provided in this regulation in the singular form denote the same meaning in plural forms and vice versa, if the text so requires.
Article 2
Scope
This regulation applies to activities related to natural gas and its liquids outlined in the law, excluding activities related to dry gas and liquefied petroleum gas that are subject to the Law of Dry Gas and Liquefied Petroleum Gas Distribution for Residential and Commercial Purposes.
Chapter Two
Activities and Licenses
Article 3
General Provisions
1․ The ministry may license more than one activity in a single license, and the ministry shall decide this on a case-by-case basis.
2․ All facilities of natural gas and its liquids where any aspect of the activity is practiced are subject to the provisions of the law and the regulation, whether these facilities exist independently or as part of other facilities. This includes shared assets required for operational processes.
3․ The procedures for accounting separation must determine the proportion of shared assets required by operational processes between activities subject to the law and others.
4․ Operation in the activity of constructing, owning, and operating networks and facilities of natural gas and its liquids is limited to the preparation of facilities of natural gas and its liquids for the practice of the activity, whether the preparation is for the licensee himself or for another licensee, and it is not intended for directly engaging in the activity related to the facility.
Article 4
Classification of Activities and Licenses of Natural Gas and Its Liquids
A person shall not practice the activity unless he obtains a license in accordance with the following schedule:
| Paragraph |
Activity |
License type |
| (a) |
Constructing, owning, and operating networks and facilities of natural gas and its liquids |
Licensing the construction, ownership, and operation of networks and facilities of natural gas and its liquids |
| (b) |
Local distribution |
Local distribution license |
| (c) |
Transportation |
Transportation license |
| (d) |
Processing |
Processing license |
| (e) |
Fractionation |
Fractionation license |
| (f) |
Gas purification |
Gas purification license |
| (g) |
Collection |
Collection license |
| (h) |
Storage |
Storage license |
| (i) |
Import |
Import license |
| (j) |
Export |
Export license |
| (k) |
Sales |
Sales license |
Article 5
Granting a License
1. Licensing for the activities of constructing, owning, and operating networks and facilities of natural gas and its liquids and local distribution, must be through qualification and floating a tender.
2․ The ministry may directly license all aspects of the activity.
Article 6
General Requirements for Applying for a License
1․ The requirements for applying for a license are as follows:
(a) Proof of technical ability and financial solvency to practice the activity.
(b) Design capacity, including, but not limited to: The total capacity of facilities of natural gas and its liquids, and the capacity available to a third party if required.
(c) Preliminary engineering design documents for the facility, showing the international industry standards followed, and the technical studies.
(d) Drawings and maps of facilities of natural gas and its liquids, showing the scope of the license with collection and delivery points.
(h) Satisfying the requirements of the relevant entities whose approvals or licenses issued by them are required to practice the activity, depending on the type of activity and geographical location. This includes, but is not limited to: Approval of the High Commission for Industrial Security, license from the Transport General Authority, and environmental license.
2․ The Ministry may add some requirements in accordance with the nature of each license. This includes, but is not limited to:
(a) Submitting a service fee proposal, including all necessary information and calculations, and any additional information requested by the ministry in this regard.
(b) Justifications for requesting the exclusive right to use facilities of natural gas and its liquids.
3. An applicant may request the exclusive right to use—accompanied by justifications—and the ministry may grant this right in the license.
Article 7
Direct Licensing Application Evaluation Criteria
The ministry shall consider direct licensing applications based on the following criteria:
1․ Proof of technical ability and financial solvency to practice the activity.
2. Economic feasibility of the project related to the practice of the activity.
3. Avoiding the duplication of unwanted facilities of natural gas and its liquids.
4. Capacity available to a third party.
5․ Potential impact on competition.
6. Proximity of the proposed facilities of natural gas and its liquids to existing installations.
7․ Views and remarks of stakeholders when the announcement is published after the completion of the application requirements for license issuance.
Article 8
Qualification and Tender Floating Procedures
1․ The ministry may invite those wishing to obtain a license to construct, own, and operate networks and facilities of natural gas and its liquids or for local distribution, to take part in a tender in accordance with the following controls:
(a) The application for qualification must be submitted through the means and within the deadline specified by the ministry, by completing the approved form and providing the required documents, including, but not limited to:
(i) Proof of technical ability and financial solvency to practice the activity.
(ii) Administrative and technical expertise, financial systems, risk management policies and systems, technical resources, and operational procedures.
(b) The ministry shall review the qualification applications, verify the satisfaction of the required documents, and conduct qualification to determine the qualified bidders.
(c) The ministry shall notify qualified bidders and announce this on its website.
2. The ministry shall send the tender document to the qualified bidders, and shall be open to receiving inquiries from all bidders and responding to them.
3․ The ministry may amend the tender document, reissue it, or cancel it as it sees fit.
4. Bidders shall submit their bids during the period specified in the tender document, and any bid submitted after the deadline for receiving bids must not be accepted.
5․ The ministry shall examine the bids in accordance with the criteria stipulated in the tender document.
6․ The ministry shall announce the winning applicant and inform him of that—in accordance with the notification methods specified in the tender document—in order to complete the licensing procedures.
Article 9
License Issuance Procedures
The procedures for issuing licenses of all types are as follows:
1․ The ministry shall review a license issuance application after the requirements provided in article 6 of this regulation have been satisfied. If they are not satisfied, the applicant must be given a period of 45 days to satisfy them.
2․ If the applicant is unable to satisfy the requirements within the specified period, the applicant shall provide the ministry with justifications for this or available alternative information within 10 working days. In this case, the ministry may take any of the following measures:
(a) Granting an additional period not exceeding 45 days to satisfy the requirements.
(b) Accepting the alternative information, and it may request the applicant to provide the required information in accordance with a date specified in the license.
(c) Rejecting the justifications for not providing the required information and considering the application cancelled, and the applicant must be notified of this.
3․ The ministry shall require the applicant, within 15 days from the date of notifying him of the satisfaction of the requirements, to publish an announcement as specified by the ministry,
which must include information about the license application, pipeline routing, and scope of activity. The ministry shall receive views and remarks on the license issuance application within 90 days from the date of publication of the announcement.
4. The ministry shall issue its decision to approve or reject the application, and the rejection must be reasoned. If approved, the ministry shall issue the license.
Article 10
License Fee
First: The fee for issuing, extending, or amending any license for an activity must be as follows:
(a) For issuing a new license, an amount of 20,000 Saudi Riyals.
(b) Extending or amending a license, an amount of 10,000 Saudi Riyals.
Second: The annual fee for licensing the construction, ownership, and operation of facilities of natural gas and its liquids must be as follows:
(a) The annual fee is calculated at a rate of 1/10,000 of the capital cost of the assets of the facilities of the activity annually from the date of service commencement.
(b) The annual fee must be paid in the year following the expired financial year, as determined by the ministry.
Article 11
License Document
A license document must—in accordance with the nature of each activity—include the following:
1. License duration.
2․ Duration of completing the facility and the start of its operation.
3. Terms on extending the license.
4. Terms on capacity.
5. Scope of the license.
6․ Conditions for canceling the license.
7․ Terms on the financial and accounting requirements for licensing and its conditions.
8. Terms on the transfer of physical assets of licensed activities.
9․ Abandonment of facilities of natural gas and its liquids.
10. Terms on reports and information requested by the ministry.
11. Insurance.
12․ Any other terms or conditions that the ministry deems necessary, in accordance with the nature of each license.
Article 12
Service Commencement
A licensee shall—after completing the construction works for the facilities of natural gas and its liquids—submit an application to obtain the approval of the ministry for service commencement by attaching the following requirements:
1. Certificate of completion of mechanical works.
2. Certificate of completion of preparatory works for operation.
3․ Any other requirements that the ministry deems necessary, in accordance with the nature of each license.
Article 13
License Duration
The license duration must not be less than 25 Gregorian years.
Article 14
License Extension
1․ A licensee wishing to extend the license shall submit an application within a period no less than 4 years and no more than 10 Gregorian years before the license expiration date.
2․ The ministry shall implement the procedures for issuing licenses when extending a license, and the license extension duration must be at least 10 Gregorian years.
Article 15
License Amendment
1․ A licensee shall—before undertaking any amendment to the license—submit an application to amend the terms or scope of the license in order to obtain the required approval from the ministry.
2. The ministry may—after reviewing the application to amend the license—inform the licensee of the reimplementation of the license issuance procedures stipulated in article 9 of this regulation.
Article 16
Disposal of the License
1․ A licensee shall submit an application to dispose of the license in order to obtain the required approval from the ministry.
2. One of the forms of disposal of the license is the case of offering the licensed facility for public subscription.
3․ The ministry shall decide on the application within a period not exceeding 60 days from the date of notification of the licensee that the application is complete.
4․ The ministry shall issue its decision to approve or reject the disposal of a license, and the rejection must be reasoned.
Article 17
License Expiration
A license expires in any of the following cases:
1․ Expiry of the license duration.
2. Issuance of a decision by the committee to cancel the license.
3․ Approval by the minister of the request by the licensee to terminate the license.
4․ Distress or bankruptcy of the licensee.
Article 18
Procedures for Abandoning Facilities
1․ If a licensee does not wish to extend the license, he shall submit to the ministry at least three years before the license expires, an application to undertake abandonment procedures as follows:
(a) The licensee shall submit a plan for abandonment of facilities of natural gas and its liquids for review and approval by the ministry at least three years before the license expiration date.
(b) The ministry shall review the plan submitted by the licensee to amend it if necessary and approve it. The ministry shall announce this on its website.
2․ The ministry shall arrange with the licensee the procedures for transferring ownership of all physical assets to the state after the expiry of the license, unless the license stipulates otherwise.
Article 19
Scope of License
For each activity, the scope of licenses for activities is as follows:
1․ Scope of license for a local distribution network: From the collection point to the delivery points for a consumer within a specified geographic scope, including—but not limited to—the individual meters of each consumer.
2․ Scope of license for local distribution by tankers: From the collection point to the delivery points for a consumer within a specified geographic scope, including—but not limited to—the assets of gas compression or liquefaction stations, regasification stations, and tankers.
3. Scope of licence for transportation: Between the collection and delivery points for pipelines or transportation by tankers and others, and includes—but is not limited to—all the assets necessary to practice the activity, such as: Compressors, pumps, filters, and pressure reducing stations.
4. Scope of licence for transportation or collection in the main gas network or an independent network: From the collection points at gas processing plants, other producers, import terminals, or others, to the delivery points for a third party, and includes—but is not limited to—all assets necessary to practice the activity, such as: Compressors, pumps, filters, and pressure reducing stations.
5․ Scope of licence for export and import: From the collection point to the delivery point at the export and import facility, including—but not limited to—all assets necessary for the export and import of natural gas and its liquids, whether fixed or floating import and export terminals.
6․ Scope of license for purification, processing, and fractionation plants: Covers the entire perimeter of the plant to the delivery points in the main gas network, independent networks, or transportation pipelines. This includes—but is not limited to—all assets necessary to practice the activity, such as: Core operational assets and supporting assets for these operations, such as steam, compressed air, or water production facilities.
7․ Scope of license for storage: Within the boundaries of the assets of the storage facility, from the collection points to the delivery points for transportation pipelines and others, including—but not limited to—pumping, compression, and liquefaction stations as well as tanks.
8․ As an exception to the provisions of the preceding paragraphs of this article, the ministry may—in accordance with reasonable technical justifications—amend the scopes of the licenses for activities and stipulate the amended scope in the license.
Chapter
Three Obligations
Article 20
General Obligations
A licensee shall comply with the following:
1․ Fulfilling all necessary legal requirements in accordance with this regulation or those issued by the relevant entities.
2. That all works undertaken by him or through others, must be consistent with the provisions of the law, the regulation, and related laws.
3. Refraining from carrying out any act that restricts fair competition in any or part of the activities.
4. Periodic inspection of assets and pressure control systems and prevention of its increase.
5․ Carrying out all improvements, additions, and repairs to assets and replacing assets that have reached the end of their useful life, have been damaged, or have been proven unsafe by periodic inspection.
6. Security, safety, health, and environmental requirements and instructions issued by the relevant entities.
7. Insurance for employees against accidents and occupational hazards, and against losses and damages to facilities of natural gas and its liquids, according to the requirements of the relevant entities, throughout the license duration.
8. Restoring facilities of natural gas and its liquids, if damaged, to operate at their full capacity within the period specified by the ministry.
9․ Implementing the financial and accounting standards issued by the relevant entities, and the standards determined by the ministry for calculating the annual fee and service fees.
10․ Inventorying assets, preparing a list of them, and having it approved by an external auditor according to the relevant laws; submitting it to the ministry before service commencement; and updating the list annually by adding new assets or written-off assets, and submitting it to the ministry
11․ Keeping reports, records, technical and accounting information, and the like for a period of five years after the license expires.
12․ Studying future needs for facilities of natural gas and its liquids based on expected changes in supply and demand, and formulating future plans for the exploitation, expansion, and development of these facilities.
13․ Notifying the ministry of any temporary changes to the capacity specified in the license document, the reasons for the change, and the timeframe within which the change continues.
14․ Providing the service to a third party in accordance with the obligations agreed upon in the contractual relationship between the parties, if required.
15․ Providing a service for receiving complaints, announcing this service, and responding to them quickly, if required.
Article 21
Obligations of Local Distribution Activity
A local distribution activity licensee shall comply with the following:
1. Providing control means, metering systems for consumers and facilities, and the services necessary to provide the service.
2․ Providing technical drawings and information and coordinates for the network and any expansion to it, and keeping them for the license duration.
3. Selling gas to a consumer in accordance with the approved tariff specified by the state, with the service fees specified in the license added to it.
4․ Obtaining the prior approval of the ministry before performing the service for any new gas connection requests.
5. Submitting an annual report to the ministry, including market expansion plans and investment plans, to obtain its approval.
6. Preparing the forms of contracts and agreements with third parties in accordance with the requirements of the ministry.
Article 21
Obligations of Gas Transportation Activity
1․ A gas transportation activity licensee shall comply with the following:
(a) Obtaining the required approvals—in accordance with the relevant laws—for pipe routes and their protection.
(b) Providing additional capacity to a third party.
(c) Including the assets of branch pipelines in the license when the licensee constructs them to provide services to a third party, and excluding from the license the branch pipelines constructed by a third party.
(d) Preparing the forms of contracts and agreements with third parties in accordance with the requirements of the ministry.
2․ A licensee for gas transportation activity in the main gas network shall obtain a license for the collection activity when receiving natural gas and its liquids from local producers or importers.
Article 23
Obligations of Collection and Sale of Natural Gas and Its Liquids Activities
A collection and sale of natural gas and its liquids activities licensee shall comply with the following:
1․ The scope of collection must be identical to the scope of the main gas network.
2․ The collection or sale agreements must specify responsibilities, terms, and conditions.
Article 24
Obligations of Purification, Processing, and Fractionation Activities
A purification, processing, or fractionation activities licensee shall submit periodic reports to the ministry as specified in the license, including, but not limited to: The specifications of natural gas and its liquids, quantities, seasonal and monthly variations, maintenance downtime forecasts, emissions reports, and production plans for the next five years.
Article 25
Obligations of Storage Activity
A storage activity licensee shall submit periodic reports to the ministry as specified in the license, including, but not limited to: Capacities, stored quantities, flow rates, and seasonal and monthly variations.
Article 26
Regulation of the Contractual Relationship
1․ A licensee shall sign agreements and contractual relationships with a third party in accordance with the requirements and forms issued by the ministry.
2․ A licensee shall provide the ministry with the documents and papers it requests for the purpose of regulating agreements and contractual relationships between licensees, or a licensee with a third party, for approval, including, but not limited to:
(a) Contracts with customers and third parties for the sale of natural gas and its liquids.
(b) Supply, lease, operation, and maintenance agreements.
(c) Agreements governing the design and engineering conditions between licensees when constructing facilities of natural gas and its liquids.
(d) Contracts with producers or suppliers for the purchase of natural gas and its liquids.
Article 27
Capacity of Facilities
1․ A licensee shall, if he wishes to increase the capacity of a facility of natural gas and its liquids, submit an application to the ministry to amend the license.
2․ The ministry has the right to amend the capacity of any facility of natural and its liquids in a manner that achieves the objectives of the law, the regulation, and the public interest, and to stipulate the amended capacity in the license.
Article 28
Exclusive Right to Use Capacity
1. A licensee in a facility for natural gas and its liquids may submit an application to the ministry to allow him to exclusively use the capacity of that facility for a specified period, and the ministry may grant that right, and the ministry shall determine the conditions in the license document after its amendment.
2․ If a licensee at any time during the exclusive right to use duration enters into a contract to grant the right to use the capacity to a third party—without the approval of the ministry—then the exclusive right to use for the entire capacity of the facility of natural gas and its liquids is invalid, and all other provisions stipulated in this regulation regarding the right to use capacity by a third party apply.
Article 29
Right to Use Capacity
1․ If a third party submits a request to a licensee for the right to use capacity, the licensee shall provide it within the limits of the unused capacity of the facility that is not subject to the exclusive right to use. The ministry may require a licensee to provide the right to use capacity to a third party.
2․ A licensee shall apply to the ministry to obtain its approval within ten days from the date of receiving the request of a third party.
3․ The third party is subject to the terms and conditions applicable to the use of capacity by the licensee.
Article 30
Capacity Increase for a Third Party
If a third party requests from a licensee the right to use capacity, and this is not possible due to its unavailability, the third party may submit a request to the licensee to increase the capacity in accordance with the following controls:
1. The third party shall submit its request to the licensee, and the licensee shall respond to the request within 45 days with approval or rejection, and it must be reasoned.
2․ Upon approval by the licensee, he shall submit an initial proposal for service fees and the service commencement date, as well as a license amendment application to the ministry.
3․ Upon rejection by the licensee, the third party may submit the request to the ministry for review. The ministry may request the views of both the licensee and the third party within a period determined by the ministry, provided that the views of both parties regarding increasing the capacity of the facility are explained in detail.
4․ The ministry may set the service fees and the appropriate terms and conditions for expanding the facility and require the licensee to increase the capacity of the facility and notify the third party of this. The licensee shall submit to the ministry within 25 days a license amendment application that includes all the basic details related to the capacity increase.
5․ If the ministry determines—in accordance with the public interest—that there is no need to increase the capacity, then the licensee and the third party must be notified of the decision.
Article 31
Service Fees and Procedures for Reviewing Them
1․ The ministry shall set the service fees and the terms and conditions applicable to them.
2. Service fees become applicable upon service commencement at facilities of natural gas and its liquids.
3․ Any activities that do not include an exclusive right to use must have service fees set by the ministry when requested by a third party.
4. The ministry shall specify the application period of the approved service fees, which must not exceed five years. It is permitted to review and amend service fees in the following cases:
(a) Submitting to the ministry an application to amend the service fees at any time after two years have passed since the start of the application of the service fees, and if the ministry decides to amend them, the ministry shall issue the service fees in accordance with paragraph 1 of this article.
(b) The ministry may review the service fees if it deems it necessary to review them, and if the ministry decides to amend them, the ministry shall issue the service fees in accordance with paragraph 1 of this article.
(c) The ministry shall review and reissue service fees when the license is amended or extended.
5․ Without prejudice to the provisions of paragraph 4(a) of this article, the licensee shall submit an application to review the service fees within a period of 130 days before the expiry of the application of the existing service fees.
6․ It is not permitted to make adjustments to the fee calculation to compensate for revenue shortfalls during previous fee periods resulting from mismanagement by the licensee.
7․ The ministry may issue rules and procedures that determine the mechanism for calculating, reviewing, and setting service fees, as well as the financial and accounting standards in this regard.
Article 32
Review of Service Fees
The ministry shall review service fees as follows:
(a) The ministry shall notify the licensee of the commencement of the service fee review procedures.
(b) The licensee shall provide all investment, financing, operational, financial, and supporting information, and any other additional information requested by the ministry within 25 days from the date of commencement of the service fee review.
(c) The licensee shall publish the announcement of the commencement of service fee review by the ministry in the medium specified by the ministry according to the relevant laws, within ten working days of the completion of the above information and its approval by the ministry, and proof of its publication to the ministry must be submitted.
(d) The ministry shall review the information provided in paragraph (b) of this article and the views of the stakeholders, set the prescribed service fees, and notify the licensee to begin applying them.
Article 33
Accounting Separation Procedures
A licensee shall comply with the following:
1. Preparing accounts and reports for each activity separately.
2․ Submitting the audited annual financial statements to the ministry within a period not exceeding six months from the end of the financial year.
3. Separating costs and revenues associated with the aspects of the activity stipulated in the license from other activities not subject to the law, and providing the ministry with accounting separation documents.
4. Principles and grounds of separating costs and revenues and submitting accounting separation documents, including:
(a) That the accounting separation information is consistent with the audited financial statements subject to the relevant laws in the Kingdom, and that it is reconciled with those statements, and supporting information and explanations for that reconciliation must be provided.
(b) That the accounting separation information is adequately supported by evidence, documents, and methodologies, in a manner that enables an internal or external auditor to trace its source and review it.
(c) That the allocation process for costs, revenues, and assets shared between activities subject and not subject to the law is based on the actual driver of the cost or revenue, unless the ministry decides otherwise. Allocation mechanisms must also be clear and consistent in the allocation process.
(d) That the accounting methodologies, principles, and standards used in the preparation of the accounting separation are consistent annually, unless there is a logical explanation and clarification of the reasons for the change and modifications, with the submission of supporting justifications and documents for those changes.
(e) Ensuring the transparency and clarity of reconciliation between internal databases, reports, and statements related to the accounting separation process.
(f) That the accounts, allocation processes, and other information used in the accounting separation system are based on verifiable data.
(g) Preparing the accounting separation data in a way that ensures that it does not have a material impact on any regulatory decisions.
(h) That the information must be detailed, accurate, and free of errors.
(i) That the senior executive management of the licensee is responsible for the quality and accuracy of the information provided to the ministry related to accounting separation.
(j) That the accounts, reports, and information are clear, traceable, and easy to understand, and when submitted, they must be in unrestricted formats and use standard software and data processing tools.
5․ The accounting separation documents must include at least the following:
(a) Accounting separation guide: A guide that clarifies all the methodologies, principles, and procedures that the licensee will follow, and it must include the following:
(i) Design and structure of the accounting separation system.
(ii) Cost and revenue allocation criteria.
(iii) Description of the cost and revenue accounts list of the licensee.
(iv) Principles and methodology of asset revaluation.
(b) Accounting separation results: The outputs of the accounting separation process, in accordance with the accounting separation guide, must include the following:
(i) Actual results of the accounting separation process.
(ii) Income statement, financial position, and cash flows for the licensed activity.
(iii) Financial indicators, for example, return on investment, return on assets, working capital, weighted average cost of capital (WACC), and profit margins.
(iv) Reconciliation statement between accounting separation and audited financial statements.
(v) Cost and revenue allocation matrices.
(vi) Information about assets, including a fixed assets register that covers the historical value of assets, accumulated depreciation, and assets added and discarded.
(vii) Information about sales quantities.
(viii) Acknowledgment of output accuracy and senior management responsibility of the licensee.
(c) Supporting studies: They must provide additional technical and standard details about certain cost allocation standards in the accounting separation system.
6. A licensee shall submit the accounting separation documents annually to the ministry within a deadline not exceeding six months after the end of each financial year, as follows:
(a) An electronic copy of the accounting separation documents in both Microsoft Excel and Microsoft Word formats, as required by the nature of each item of the accounting separation results detailed above. These files must be unprotected, and it must be possible to track, amend, and review the information.
(b) A signed electronic copy of the management responsibility statement in PDF format.
(c) An electronic copy of the audited financial statements for the relevant financial year.
7․ A licensee shall obtain the approval of the ministry before commencing the asset revaluation procedures.
8․ A licensee shall, at its own expense, appoint an accredited external auditor to audit, review, and approve the accounting separation documents and submit the necessary reports regarding the audit and review process to the ministry, accompanied by recommendations and an opinion on the accounting separation documents.
9․ The ministry may audit the accuracy and objectivity of the accounting separation in light of relevant information and documents, and if there are any observations or requirements that require amendments by the licensee, the ministry shall notify the licensee of those observations in the form and format it specifies. The licensee shall comply with those requirements and required amendments within the period specified by the ministry.
Article 34
Standards
1․ A licensee shall comply with international industry standards in the design, construction, operation, maintenance, and inspection of facilities of natural gas and its liquids, the tanks used in local transportation and distribution operations, and facilities financed or constructed by third parties that become an integral part of his existing facility, in accordance with the specifications, standards, and requirements prescribed by the relevant laws.
2․ The ministry may issue technical and operational controls and requirements that include specifications, standards, and sound practices related to activities of facilities of natural gas and its liquids, in coordination with the relevant entities.
Article 35
Reports
1. A licensee shall provide the ministry—periodically—with reports of information prepared by the ministry necessary to implement the law, including, but not limited to:
(a) A statement of the quantities of natural gas and its liquids purchased or sold.
(b) A statement of the quantities of natural gas and its liquids that are being transported, processed, purified, fractionated, stored, collected, or distributed.
(c) Disclosure of contracts entered into in relation to the provision of services.
(d) Disclosure of any changes in capacity.
(e) Accident and security statistics.
(f) Performance and emissions.
(g) Any other requests that the ministry deems appropriate to detail.
2․ A licensee shall submit annual reports to the ministry within six months after the end of each Gregorian year, containing the following information:
(a) A statement of the annual total of reports stipulated in paragraph 1 of this article, detailed by month.
(b) Final accounts for the completed financial year, audited and reviewed by an accredited external auditor in accordance with relevant laws, and an updated asset inventory register approved by an external auditor.
(c) Forecasts of supply and demand for natural gas and its liquids for the next five years.
(d) Forecasts for downtime, maintenance, or capacity changes for the next three years.
(e) The expected operational life of facilities of natural gas and its liquids, provided that this is during the operating period.
3․ A licensee shall, for the purpose of preparing the reports required to be submitted to the ministry, classify accounts related to activities subject to the law and separate them from other accounts related to activities not subject to the law, and shall keep its accounting records in a manner that ensures the clarity of this.
4․ If the ministry finds that a licensee has information that the ministry deems required for the implementation of the law, he shall provide this required information in accordance with the mechanism and period specified by the ministry in its request.
5․ If a licensee is unable to provide the information within the period specified by the ministry, or is unable to provide it in accordance with the mechanism specified by the ministry, he shall submit the justifications for this and alternative available information to the ministry within (10) working days. In this case, the ministry may take any of the following actions:
(a) Accepting the alternative information, and the ministry may require the licensee to provide the required information on a date to be determined later.
(b) Rejecting the justifications for the failure to provide the required information, and requiring the licensee to provide it within a specified period or any other additional period determined by the ministry. Failure to provide the information constitutes a violation of the provisions of this regulation.
6․ A licensee shall ensure the accuracy and correctness of the information when submitting it to the ministry.
7․ A licensee shall immediately inform the ministry of any update or material change to his business.
Article 36
Assigning Certain Inspection Tasks
1․ The ministry shall conduct audits, inspections, and examinations of the sites of the licensee during the official working hours of the licensee to ensure compliance with the provisions of the law, the regulation, and license conditions.
2. A licensee shall enable inspectors to view all documents related to the activity.
3․ A licensee shall provide all information requested by the ministry for the purpose of review and inspection.
4․ The minister may assign certain inspection and violation policing tasks to the private sector, provided that the assignment takes into account the following controls and standards:
(a) Fulfilling the legal requirements specified by the ministry.
(b) Disclosing any conflict of interest, even if it is a potential one.
(c) Adhering to confidentiality and undertaking not to disclose any information that it has viewed, even after the inspection tasks have been completed and the violations have been captured.
(d) Satisfying the technical expertise and financial capabilities necessary to carry out tasks of inspection and policing violations.
(e) Complying with the conditions, specifications, standards, criteria, and technical practices in accordance with the relevant laws.
(f) Complying with the inspection and violation policing mechanism determined by the ministry, including the requirement for prior coordination with the ministry before inspection.
Article 37
Environment, Health, Safety, and Emergency Response
1․ A licensee shall comply with the following:
(a) Security, safety, health, and environmental requirements and instructions issued by the relevant entities, which are competent with—including, but not limited to—the following:
(i) Work environment.
(ii) The assets of the facilities, equipment, and materials used in the work of all employees.
(iii) Occupational safety laws and practices.
(iv) Identifying, evaluating, and documenting all risks associated with the practice of activities.
(v) Emergency response plans.
(vi) Occupational health and safety procedures.
(vii) Design, construction, and operation of facilities of natural gas and its liquids, in a manner that ensures environmental protection and maintains the safety and health of employees and the public, as well as the integrity of physical assets throughout the operational life of these facilities.
(b) Immediately informing the ministry of any accidents or leaks in accordance with the mechanism determined by the ministry, investigate them, prepare relevant reports, and keep them for a period of not less than five years.
2․ A licensee shall prepare an emergency plan in accordance with the instructions of the relevant entities, and develop a comprehensive emergency response plan that outlines all necessary response procedures and the stages followed to mitigate the impacts on the environment, health, safety, and security, and a plan for recovery from these impacts. The following—at a minimum—must be complied with:
(a) Reviewing and updating it regularly.
(b) Developing, implementing, and practicing emergency scenarios to test them in coordination with the ministry, relevant entities, other licensees, and third parties.
(c) Qualifying and training the personnel and employees of the licensee.
(d) Procedures for notifying the relevant entities, and their contact numbers.
Chapter Four
Final Provisions
Article 38
Entry into Force of the Regulation
The provisions of this regulation enter into force from the date of their publication on the website of the ministry.
Published in Umm Al-Qura 5077 issued on 28 March 2025.
