=== dc2024-01-0007-pages-01.ppm ===
Republic of the Philippines
DEPARTMENT OF ENERGY
(Kagawaran ng Enerhiya)

DEPARTMENT CIRCULAR NO. 0C2024-O1- 0007

ADOPTING THE AMENDED RULES AND REGULATIONS GOVERNING THE
PHILIPPINE DOWNSTREAM NATURAL GAS INDUSTRY

Pursuant to Republic Act (RA) No. 7638, known as the "Department of Energy Act of
1992”, creating the Department of Energy (DOE), Executive Order No. 66, designating
the DOE as the lead agency in developing the Philippine Downstream Natural Gas
(DNG) Industry, and Administrative Order No. 38, providing for the institutional
strengthening of the DOE, the DOE, in consultation with appropriate government
agencies and private stakeholders, hereby issues, adopts and promulgates the
following regulations:

RULE |
PRELIMINARY PROVISIONS

Section 1. Short Title.

This Circular shall be known as the “Amended Philippine Downstream Natural Gas
Regulation".

Section 2. Scope.
This Circular shall prescribe the guidelines on:
a. The requirements for the issuance of Permits to Operators for the siting,
construction, operation and maintenance, modification, expansion,

rehabilitation, decommissioning and abandonment of DNG Facilities;

b. The requirements for the issuance of Accreditations to Participants in the trade
of Natural Gas delivered through DNG Facilities;

c. The industry-specific standards and best practices for the safe and responsible
operation of the DNG Industry;

d. The responsibilities of the DOE, the Operators of DNG Facilities, and
Participants in the trade of Natural Gas in compliance with this Circular;

e. The reportorial requirements of Operators and Participants; and

f. The implementation of plans and programs geared towards the Promotion and

development of the DNG Industry in support of the Philippine Energy Plan
(PEP).

Energy Center, Rizal Drive cor. 34th Street, Bonifacio Global City, Taguig City, Philippines 1632
Tel. No, (Trunkline) (632) 8479-2900

Website: http://www.doe. gov. ph; Email: info@doe.gov.ph

=== dc2024-01-0007-pages-02.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry

Page 2 of 23

Section 3. Declaration of Policies.

It is hereby declared the policy of the State to:

a.

Provide a conducive environment for the promotion and development of the
DNG Industry through the issuance of policies, plans and programs therefor;

. Promote the development and operation of gas-fired power plants

notwithstanding the depletion of the Malampaya Natural Gas Supply;

Promote Natural Gas as a sustainable, accessible, and flexible fuel which can
contribute in attaining the goals of the PEP;

. Ensure compliance with DNG Industry product and facility standards and best

practices on Health, Safety, Security, and Environment (HSSE), and other
applicable rules and regulations under a system of safe, secure, high-quality,
environmentaily responsible operations and services that afford protection to
consumers and industry stakeholders;

. Promote the financial viability of the DNG Industry by fiberalizing the entry of

investors and encourage access to capital and off-taker market under a system
of transparency, competition, and fair trade:

Support the exploration and development of Indigenous Natural Gas resources
and facilities, and prioritize the use of Indigenous Natural Gas to help attain
greater energy security;

. Ensure transparent pricing of Natural Gas and rates for its importation, storage,

regasification, transmission and distribution in a regime of open and fair
competition and full public accountability that shall promote operational and
economic efficiency and enhanced competitiveness of Philippine products;

. Encourage the development of the necessary trades, technical expertise, and

skills of personnel of the Government Agencies and private sector to support
the DNG Industry; and

Facilitate the development of power and non-power end-uses of Natural Gas
including the use of Natural Gas as fuel for power, commercial, industrial,
residential and transport applications that promote fuel diversity and
compliance with existing environmental laws: Provided, that the power rates
from utilization of Natural Gas shall be subject to RA 9136, otherwise known as
the “Electric Power Industry Reform Act of 2001,” as amended.

Section 4. Definition of Terms.

As used in this Circular, the following terms shall be defined as follows:

a.

Accreditation refers to the authorization granted by the DOE to a natural or
juridicai person as a Participant in the business of Natural Gas trade through a
DNG Facility in the country;

=== dc2024-01-0007-pages-03.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas industry

Page 3 of 23

b. Acknowledgment refers to the acknowledgment granted by the DOE to a
natural or juridical person under Section 2 of the Guidelines for Issuance of
Participant's Accreditation;

c. Affiliate refers to any corporation that, directly or indirectly, through one or more
intermediaries, controls, is controlled by, or is under the common control of
another corporation;

d. Aggregation refers to the activity of a natural or juridical person that procures
Liquefied Natural Gas (LNG) volumes and Indigenous Natural Gas through
supply and/or financial trade contracts, and sells the blended and consolidated
gas to gas buyers in the Philippines or abroad;

e. Aggregator refers to a natural or juridical person accredited by DOE to engage
in the business of Aggregation;

f. Anti-Competitive Behavior refers to any behavior and/or agreement in violation
of the provisions of RA 10667, otherwise known as the “Philippine Competition
Act” (PCA);

g. Applicant refers to any Filipino and/or foreign citizen or Filipino and/or foreign-
owned corporation who wishes to secure any Permit or Accreditation under this
Circular;

h. Bunkering refers to the business of selling LNG as fuel for domestic or foreign
marine vessel;

i. Bunker Trader refers to a natural or juridical person accredited by DOE to
engage in the business of Bunkering;

j. Capacity refers to the handling design of a system used in the context of its
functionality and expressed in a specific measurement such as volume or flow
per time unit or designated measurement unit;

k. Conventional Transportation System refers to a network of fixed facilities made
up of, among others, wellheads, compressor stations, pipelines, and metering
for the purpose of delivering Natural Gas. This includes both the Transmission
and Distribution Systems;

I. Decommissioning and Abandonment refers to the activity consisting of the
removal or condemnation of the entire or a component of the DNG Facility
installation that has come to the end of its productive life and, if applicable, the
subsequent restoration of the facility site to its previous condition;

m. Delivery refers to the transmission or distribution of Natural Gas and the Supply
of Natural Gas at wholesale or retail;

n. Distribution refers to the transportation of Natural Gas through a Distribution
System;

=== dc2024-01-0007-pages-04.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 4 of 23

0. Distribution System refers to a system of conventional pipelines and their
related facilities starting at the receipt of Natural Gas from the Transmission
System up to the receiving facility of the End-User;

p. Downstream Natural Gas Facility or DNG Facility refers to the facilities referred
to in Section 9 of this Circular including the pipeline and its related facilities used
to transport Natural Gas after the point of sale up to the fast connection point to
the End-Users;

q. Downstream Natural Gas Industry or DNG Industry refers to Operators of DNG
Facilities, Participants of Natural Gas trade, and their Affiliates;

rt. End-User refers to any natural or juridical person who acquires and receives
Delivery of Natural Gas for final use;

s. Expansion refers to an activity resulting to an increase in the design Capacity
of the DNG Facility;

t. Financial Closing refers generally to the stage of negotiation where a legally
binding financial commitment actually exists to provide funding for a project and
all conditions have already been met to permit the mobilization of funds;

u. Force Majeure refers to extraordinary events not foreseeable or avoidable,
events that could not be foreseen, or which, though foreseen, are inevitable,
such as:

. acts of God such as earthquake, typhoon, flood, and other similar events;

. Strikes, lockouts, or other major industrial disturbances;

. acts of the enemy, terrorists, wars, blockades or insurrections, riots, and
other civil disturbances;

. fire or explosion or other similar major accidents of the DNG Facility;

. epidemic or quarantine;

. order of any court or tribunal or by-a government agency having jurisdiction

on the matier; and

other similar events of the same import and implication.

Qn —

N OMA

v. Government Agency refers to any government or governmental, semi-
governmental, administrative, monetary, fiscal or judicial body, department

commission, authority, tribunal, agency or entity, and any bureau of the
Republic of the Philippines;

w. Guidelines for Issuance of Operator's Permit refers to the guidelines issued by
the DOE attached hereto as Annex A;

x. Guidelines for Issuance of Participant’s Accreditation refers to the guidelines
issued by the DOE attached hereto as Annex B;

y. Guidelines for Submission of Reportorial Requirements refers to the guidelines
issued by the DOE attached hereto as Annex C;

z. Importation refers to the acquisition and bringing of LNG into the Philippines for
domestic use or export;

=== dc2024-01-0007-pages-05.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 5 of 23

aa. /mporter refers to a natural or juridical person accredited by the DOE to engage
in the business of Importation;

bb. indigenous Natural Gas refers to Natural Gas produced from fields within the
territorial jurisdiction of the Republic of the Philippines;

cc. Insurance refers generally to risk-transfer mechanism that ensures full or partial
financial compensation for the loss or damage caused by event(s) beyond the
control of the insured party wherein, compensation is normally proportionate to
the loss incurred;

dd. Liquefied Natural Gas or LNG refers to Natural Gas which has been liquefied
by cooling at a cryogenic temperature;

ee. LNG Storage and Regasification Terminal refers to all component facilities used
to receive; unload, load, store, and regasify LNG. It shall consist of a jetty and
unloading/loading arms, cryogenic and non-cryogenic pipelines, storage tanks
and pumps, boil-off gas compressors and condensers, vaporizers, control
facilities, metering, send out, and other relevant components;

ff. Maritime Agencies refers to Government Agencies having jurisdiction over the
administration of maritime related matters;

gg. Modification refers to a major change or alteration to the design or any
component of the DNG Facility to operate more efficiently or resolve an issue;

hh. Natural Gas refers to the gaseous mixture of hydrocarbons, primarily methane,
but generally includes ethane, propane and higher hydrocarbons, and some
non-combustible gases such as nitrogen and carbon dioxide:

ii. Natural Gas Sales and Purchase Agreement or NGSPA refers to any contract
or agreement for the delivery and sale of Indigenous Natural Gas or imported
LNG by and between sellers, Suppliers, buyers and End-Users;

jj. Operator refers to a natural or juridical person who owns or is authorized to
operate the DNG Facility and is issued with a DOE Permit to engage in the
operation of a DNG Facility;

kk. Own-Use Operator refers to an Operator engaged in the exclusive use of DNG
Facilities by itself and/or its Affiliates;

ll. Parent Company refers to a corporation which has control over another
corporation either directly or indirectly through one or more intermediaries;

mm. Participant refers to a natural or juridical person authorized and issued with
an accreditation certificate by the DOE to engage in the business of Natural
Gas trade through the DNG Facility either as Supplier, Aggregator, Bunker
Trader, Reseller, or the combination thereof;

=== dc2024-01-0007-pages-06.ppm ===
DC on Adopting the Amended Rules and Regulations Goveming the Philippine Downstream Natural
Gas Industry
Page 6 of 23

nn. Permit refers to the authorization granted by the DOE to a natural or juridical
person as Operator for the siting, construction, operation and maintenance of
DNG Facilities;

00. Philippine and International Accepted Standards refers to those internationally
recognized practices, methods and acts which would ordinarily be expected
from an experienced and competent operator of DNG Facilities in the
Philippines under comparable conditions and consistent with applicable laws in
the Philippines at the relevant time;

pp. Rehabilitation refers to any activity consisting of the major restoration to the
DNG Facility or any damaged component thereof;

qq. Reselling refers to the business of acquiring Natural Gas through the DNG
Facility from a Supplier or Aggregator and reselling them to an End-User;

rr. Reseller refers to a natural or juridical person accredited by DOE to engage in
the business of Reselling;

ss. Supplier refers to a natural or juridical person accredited by DOE to engage in
the business of Supply;

tt. Supply refers to the business of acquiring or producing Natural Gas from an
indigenous or imported source and selling such Natural Gas to gas buyers in
the Philippines or abroad;

uu. Third-Party Access or TPA refers to the business of allowing access by a third
party End-User or non-Affiliate to the entire Capacity of any DNG Facility and
their related facilities;

w. Transmission refers to the transport of Natural Gas through a Transmission
System;

ww. Transmission System refers to a system of conventional pipelines and their
related facilities starting at the receipt of Natural Gas from indigenous supply
and/or from an LNG Storage and Regasification Terminal up to the receiving
facility of the Distribution System; and

xx. Virtual Transport System refers to any alternative modes of Natural Gas
Delivery other than through the Conventional Transport System such as use
of land vehicles or sea vessels, with or without an on-site modular
regasification unit.

RULE Il
DOE RESPONSIBILITIES

Section 5. Responsibilities.

The DOE shall have the overall responsibility of supervising and monitoring the
development of the DNG Industry. Towards this end, the DOE shall perform the
following functions:

=== dc2024-01-0007-pages-07.ppm ===
DC on Adopting the Amended Rules and Regulations Goveming the Philippine Downstream Natural
Gas Industry
Page 7 of 23

a. Establish standards on gas quality, facility construction and equipment
installation, safety and security of operation, and environmental protection in
coordination with relevant government agencies.

For this purpose, the Technical Committee (TC) on Downstream Natural Gas
Standards on Product, Facility and Code of Practice created pursuant to the
Memorandum of Agreement dated 14 May 2021 shall develop and promulgate
the applicable Philippine National Standards on the DNG Industry. The TC is
composed of representatives from the following sectors:

. Academe;

. Trade/industry;
Consumer;

. Professional associations;
. Research institutions;

. Government Agencies; and
. Testing institutions.

NOOR WN a

b. Enforce DNG Industry compliance with the standards, in coordination with
relevant Government Agencies, through issuance of technical regulations
implementing the standards, review of reports and conduct of onsite inspection.

The Inter-Agency Health, Safety, Security and Environment Inspection and
Monitoring Team (IA-HSSE IMT) created pursuant to the Memorandum of
Understanding for the Organization of an IA-HSSE IMT for Natural Gas
Facilities dated 24 November 2015 shall conduct onsite inspection of DNG
Facilities and perform other responsibilities thereunder. The IA-HSSE IMT is
composed of representatives from the following Government Agencies:

DOE;

Maritime Industry Authority (MARINA);

Philippine Coast Guard (PCG);

Department of Environment and Natural Resources (DENR);
. Department of Labor and Employment (DOLE);

. Bureau of Fire Protection (BFP); and

. Department of Health (DOH).

NOOAWNA

c. Issue the following:

1. Permit for Operators involved in the implementation of activities related to
siting, construction, operation and maintenance, modification, expansion,
rehabilitation, decommissioning and abandonment of DNG Facilities;

. Accreditation of Participants involved in the trade of Natural Gas;

. Acknowledgment of LNG importation and exportation notification; and

. Other endorsements or issuances in furtherance of the development of the
DNG Industry.

& Wh

The DOE, through the Energy Virtual One-Stop Shop (EVOSS) Steering
Committee, shall integrate the procedure for the processing and issuance of
Permits, Accreditations, and Acknowledgments pursuant to RA 11234,
otherwise known as the “Energy Virtual One Stop Shop Act” (EVOSS Act);

=== dc2024-01-0007-pages-08.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstrearn Natural
Gas Industry
Page 8 of 23

d. Review, suspend or revoke Permits and Accreditations after a finding of non-
compliance with the provisions of this Circular and related issuances;

e. Issue written approval on the assignment or transfer of Permit, after a finding
that the assignee or transferee has met all the legal, technical, and financial
qualifications and has committed itself to assume all existing obligations of the
Operator, and such assignment or transfer is in accordance with existing laws,
rules, and regulations;

f. Endorse to the Philippine Competition Commission (PCC) for investigation any
reported or observed Anti-Competitive Behavior in the DNG Industry;

g. Coordinate with relevant Government Agencies, in their capacities as investing
arms, to catalyze the development of the DNG Industry;

h. Require the submission of regular and special reports by Operators and
Participants;

i. Publish at the DOE website the list of Operators and Participants with status of
their Permits and Accreditations;

j. Create a Downstream Natural Gas Review and Evaluation Committee (DNG-
REC) which shall evaluate and recommend for the approval of the DOE
Secretary or the DNG-REC Chair, applications, policies and programs for the
development of the DNG Industry; and

k. Implement all other necessary measures and programs pursuant to existing
laws, rules and regulations.

RULE lll
DOWNSTREAM NATURAL GAS INDUSTRY STRUCTURE AND
RESPONSIBILITIES

Section 6. Structure.
The DNG Industry shall consist of the following sectors:

a. Participants in the trade of Natural Gas:
1. Supplier;

. Aggregator;

. Reseller;

Bunker Trader; and

Other persons engaged in the trade of Natural Gas.

NG Facility Operators of the following:

. LNG Storage and Regasification Terminals;
. Transmission System;

. Distribution System;

. Virtual Transport System; and

. Other related facilities.

GAKRONAG AWD

=== dc2024-01-0007-pages-09.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 9 of 23

Section 7. Natural Gas Supply.

The procurement, delivery, and pricing of Natural Gas from importation or from
indigenous production facilities shall be transparent, competitive, and secure. The
DOE may require the Participants to submit relevant information pertaining to Supply
contracting, procurement, pricing, and distribution to users for the purpose of
monitoring, subject to the rules on confidential information under Section 29 of this
Circular.

The DNG Facilities may be designed and constructed to ensure the accommodation
of Indigenous Natural Gas, imported LNG, or a combination of both. Moreover, the
DOE shall prescribe measures to support the optima! supply and use of Natural Gas,
especially from indigenous sources, including, as may be necessary, the priority
dispatch and/or sourcing of Indigenous Natural Gas. The DOE shall take into account
energy security and consumer welfare in the formulation of the said measures.

In order to promote the exploration and development of Indigenous Natural Gas
sources and maximize government revenue from its sale, the DOE may mandate the
blending or aggregation of imported LNG and Indigenous Natural Gas and/or enforce
the priority sourcing of Indigenous Natural Gas for power generation.

Section 8. Responsibilities of Participants.

a. Align all goals and objectives to the accomplishment of the declared Policies of
this Circular,

b. Secure Accreditation before engaging in the trade of Natural Gas in accordance
with the Guidelines for Issuance of Participant's Accreditation;

¢. Comply with applicable laws and regulations relating to tax, labor, health, safety,

indigenous people’s rights, environment and specially protected areas and
ecology;

. Comply with the standards on Natural Gas quality in the trade of Natural Gas
pursuant to Sections 5 (a) and (b) of this Circular:

. Comply with the accurate and timely submission of reports in accordance with
the Guidelines for Submission of Reportorial Requirements;

Based on a valid order, allow the DOE, IA-HSSE IMT, PCC, and other
Government Agencies, entry to facility premises and full access to operational
records for inspection and monitoring activities in accordance with the rules and
procedures of such Government Agencies;

. Based on a valid order, allow examiners of the Bureau of Internal Revenue
(BIR) and Bureau of Customs (BOC) entry to the facility premises and full
access to accounts, books, and records for tax and other fiscal Purposes, in
accordance with BIR and BOC rules and procedures;

. Give preference to qualified local talents for hiring and _ local
companies/agencies in entering into contracts on projects or services which are
required in the business;

=== dc2024-01-0007-pages-10.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 10 of 23

i. Hold the DOE, IA-HSSE IMT, their officers, agents, and employees, free and
harmless from and against all suits, claims, demands or actions of any nature
or kind, arising out of their acts or omissions in the performance of any activity
in connection with the implementation of this Circular; and

j. Comply with the policies, requirements and responsibilities prescribed by this
Circular and relevant orders issued by the DOE pursuant thereto, and support
the overall program of the DOE to ensure a transparent, sufficient, sustainable,
accessible and reasonably priced energy.

Section 9. Downstream Natural Gas Facilities.
The regulation of this Department Circular shall cover the following DNG Facilities:
9.1. LNG Storage and Regasification Terminal.

The LNG Storage and Regasification Terminal may include a commingling system for
the blending of LNG and Indigenous Natural Gas. The basic components of the facility
shall consist of the following:

a. Jetty and unloading/loading arms;

b. Cryogenic and non-cryogenic pipelines;

c. Storage tanks;

d. Low and high pressure pumps;

e. Boil-off gas (BOG) compressors and condensers;
f. Vaporizers;

g. Send out system;

h. Metering;

i. Commingling system; and

j. Other related facilities.

9.2. Delivery Systems.

The delivery systems are the different DNG Facilities used to deliver Natural Gas from
an LNG Storage and Regasification Terminal and/or an indigenous source to End
Users, classified as follows:

a. Transmission System;

b. Distribution System;

c. Virtual Transport System; and
d. Other related facilities.

Section 10. Responsibilities of Operators.

a. Align all goals and objectives to the accomplishment of the declared policies of
this Circular;

b. Secure a Permit before engaging in any activity relating to siting, permitting,
construction, operation and maintenance, modification, expansion,
rehabilitation, decommissioning and abandonment of DNG Facilities in
accordance with the Guidelines for Issuance of Operator's Permit:

=== dc2024-01-0007-pages-11.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 11 of 23

c. Directly be responsible and accountable for the construction, operation and
maintenance of the DNG Facility by providing the necessary services,
technology, and financing, either by itself or through its duly authorized
contractors;

d. Comply with applicable Philippine laws and regulations relating to tax, labor,
health, safety, indigenous people’s rights, environment and specially protected
areas and ecology;

e. Comply with the standards on Natural Gas quality, facility construction and
equipment installation, safety and security of operation and environmental
protection in securing of location, construction, operation and maintenance,
modification, expansion, rehabilitation, decommissioning and abandonment of
DNG Facilities pursuant to Section 5 (a) and (b) of this Circular;

f. Operate the DNG Facility strictly adhering to the scope and limits of the Permit
and in accordance with HSSE best practices and Philippine and internationally
Accepted Safety Standards;

g. Timely submit accurate and complete reports in accordance with the Guidelines
for Submission of Reportorial Requirements;

h. Allow the DOE, IA-HSSE IMT, PCC, and other Government Agencies entry to
facility premises and full access to operational records for inspection and
monitoring activities in accordance with the rules and procedures of such
Government Agencies;

i. Allow examiners of the BIR and BOC entry to the facility premises and full
access to accounts, books, and records for tax and other fiscal purposes, in
accordance with BIR and BOC rules and procedures;

j. Give preference to qualified local talents for hiring and local
companies/agencies in entering into contracts for projects or services which are
required in the constructions or operations;

k. Hold the DOE, IA-HSSE IMT, their officers, agents, and employees, free and
harmless from and against all suits, claims, demands or actions of any nature
or kind, arising out of their acts or omissions in the performance of any activity
in connection with the implementation of this Circular; and

|. Participate in regular operational meetings with the DNG-REC and in the
development, issuance and review of plans, protocols, standards and codes
applicable to DNG Facilities; and

m. Comply with the policies, requirements and responsibilities prescribed by this
Department Circular and relevant orders issued by the DOE pursuant thereto,
and support the overall program of the DOE to ensure a transparent,

sustainable, stable, secure, sufficient, accessible, and reasonably priced
Natural Gas.

=== dc2024-01-0007-pages-12.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 12 of 23

RULE IV
REGULATION OF DOWNSTREAM NATURAL GAS INDUSTRY

Section 11. Permits for Operators of DNG Facility.
11.1. Requirements.

No natural or juridical person shall construct, expand, rehabilitate, modify, operate or
maintain a DNG Facility unless authorized and issued with a Permit in accordance
with the Guidelines for Issuance of Operator's Permit.

An Applicant may apply for the operation of the following DNG Facility and their related
facilities:

a. LNG Storage and Regasification Terminal:
b. Transmission System;

c. Distribution Systems; or

d. Virtual Transport System.

11.2. Approval of Permit.

For purposes of this Circular, the following shall be issued in accordance with the
Guidelines for Issuance of Operator's Permit:

. Notice to Proceed (NTP);

. Permit to Construct (PTC);

. Permit to Operate and Maintain (POM);

. Permit to Expand (PTE);

. Permit to Rehabilitate (PTR);
Permit to Modify (PTM);

. Approval of Permit Extension;

. Permit for Decommissioning and Abandonment of a DNG Facility;
Approval of Assignment or Transfer of Operatorship; and
Any other Permit as may be necessary as determined by the DOE.

Sm ra*m>eoeaocoxc;#n

The Permits shall be on a per type of DNG Facility basis.
11.3. Guiding Principles for Evaluation of Permit Application.

The DOE shall subscribe to a transparent and objective conduct of application
evaluation and approval of Permits.

The DNG-REC shall recommend the issuance of Permits for the approval of the DNG-
REC Chair after compliance with the following conditions as set out in the Guidelines
for the Issuance of the Operator's Permit:

a. The proposed project is consistent with the declaration of policies in this
Circular;

b. The Applicant has complied with the complete submission of legal, technical,
and financial requirements; and

c. The proposed project is technically and financially viable.

=== dc2024-01-0007-pages-13.ppm ===
DC on Adopting the Amended Rules and Regulations Goveming the Philippine Downstream Natural
Gas Industry
Page 13 of 23

Provided, that, the approval of the DOE Secretary shall be required for PTC and POM
as referred to under Section 11.2.

11.4. Submission of Reportorial Requirements by an Operator.

The Operator shall comply with the accurate and timely submission of reportorial
requirements prescribed by the Guidelines for Submission of Reportorial
Requirements.

11.5. Validity of Permit and Approval of Request for Extension.
a. An NTP shall be valid for a period of one (1) year.

b. APOM shall be valid for a maximum period of twenty-five (25) years, renewable
for another twenty-five (25) years.

c. The validity period of the other Permits shall be consistent with the proposal of
the Operator, subject to DOE verification. In support of its application, the
Operator shall clearly outline, for the proposed validity period, its plans, work
program, permitting, contractual commitments and other relevant information
as may be required by the DOE.

d. Request for any extension on the periods of a DOE Permit shall be allowed by
the DNG-REC only for justifiable reasons, subject to the following conditions:

1. That the Operator shall notify the DNG-REC in writing, with the details and
proof of the existence of the ground for extension and the actions taken to
resolve it; Provided, that for Force Majeure events, the notification should
be made within (30) days from knowledge of its existence or occurrence;
and

2. The Operator satisfies the DNG-REC of its proposed work program and
funding commitments to warrant the extension.

The grounds for extension shall include the following:

1. There is a Force Majeure event:

2. Non-issuance of a government permit or clearance without negligence or
fault of the Applicant or Operator: and

3. Other justifiable reasons that are beyond the control of, and prevent the
Operator from complying with its work commitments.

The Operator shall be given an extended period equivalent to the approved amended
work program.

11.6. Modification of the Conditions of the Permit.
The DNG-REC may recommend, for the approval of the DOE Secretary or DNG-REC

Chair, as may be applicable, any request by an Operator for the modification of any
condition of a Permit, subject to applicable provisions of this Circular.

=== dc2024-01-0007-pages-14.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 14 of 23

Section 12. Accreditation of Participants in the Trade of Natural Gas through the
DNG Facility.

12.1. Requirements.

No natural or juridical person shall conduct trade of Natural Gas through a DNG Facility
unless authorized, and issued an Accreditation by the DOE in accordance with the
Guidelines for Issuance of Participant's Accreditation.

An Applicant for the trade of Natural Gas through a DNG Facility may apply as
follows:

a. Supplier (including Importer and Bunker Trader);
b. Aggregator; and
c. Reseller.

12.2. Approval of Accreditation.

All the types of Accreditations shall be approved by the Oil Industry Management
Bureau (OIMB) Director. The Accreditation shall be on a per type of Accreditation
basis.

12.3. Guiding Principles for Evaluation of Accreditation Application.

The DOE shall subscribe to a transparent and objective conduct of application
evaluation and approval of Accreditations.

The Natural Gas Management Division (NGMD) shall recommend the issuance of
Accreditations, for the approval of the OIMB Director, after compliance with the
following considerations as set out in the Guidelines for Issuance of Participant's
Accreditation:

a. The proposed project is consistent with the policies of this Circular;

b. The Applicant has fully complied with all legal, technical and financial
requirements;

c. The proposed trade of Natural Gas through the DNG Facility is viable if the
following is shown by the Applicant or Participant:

1. there is an available market for the trade of Natural Gas;

2. the trade of Natural Gas shall comply with standards and responsibilities
prescribed in this Circular; and

3. the proposed trade is supported by a clear source of funding, and the
Applicant or the Participant is legally, technically, and financially competent
to proceed with the conduct of the trade.

12.4. Submission of Reportorial Requirements by a Participant.
The Participant shall comply with the accurate and timely submission of reportorial

requirements prescribed by the Guidelines for Issuance of Participant's Accreditation
and Submission of Reportoria! Requirements.
=== dc2024-01-0007-pages-15.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Indusiry
Page 715 of 23

12.5. Validity of DOE Accreditation.

All Accreditations shall be valid for a period of fifteen (15) years and may be renewed,
subject to compliance with prevailing laws and regulations, for a maximum period of
fifteen (15) years per renewal.

12.6. Modification of Conditions of Accreditation.

The NGMD may recommend, for the approval of the OIMB Director, any request by a
Participant for the modification of any condition of an Accreditation, subject to
applicable provisions of this Circular.

Section 13. Application Fee.

The Applicant, Operator or Participant shall pay the DOE a non-refundable fee for the
processing and evaluation of its application as provided in the latest DOE Approved
Schedule of Fees and Charges (Annex A-1).

RULE V
OPERATION OF DOWNSTREAM NATURAL GAS FACILITY

Section 14. Own-Use.

a. The Own-Use Operator shall utilize its entire Capacity exclusively for own-use
and shall not be allowed to enter into TPA arrangements.

b. The Own-Use Operator shall comply with the provisions of this Circular,
specifically the responsibilities prescribed under Section 10 hereof.

Section 15. Third-Party Access.

The entire Capacity of a DNG Facility of an Operator may, at its discretion, be offered
for TPA. Such Operator shall utilize its entire Capacity exclusively for TPA and shall
not be allowed to utilize any such Capacity for Own-Use.

15.1. Classifications of TPA.

1. Negotiated TPA.

Negotiated TPA shall refer to a commercial arrangement which allows the Operator
and a third-party End-User or a non-Affiliate to agree and execute negotiated terms
and conditions on the use of the entire or a portion of the Capacity of the DNG Facility
which shall be governed by the following:

a. The terms and conditions of the commercial arrangement shall not constitute
Anti-Competitive Behavior; and

b. The Operator shall comply with the provisions of this Circular, specifically the
responsibilities prescribed under Section 10 hereof.

=== dc2024-01-0007-pages-16.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 16 of 23

2. Competitive TPA.

The Operator may publicly offer its entire or a portion of its Capacity to third-party End-
Users or non-Affiliates for a Competitive TPA. The Competitive TPA shall be conducted
in accordance with the following:

a. The Operator shall notify the DOE of the terms of reference of the Competitive
TPA offer;

b. The conduct of business shall be open and public, and the offer of Capacity
shall be transparent, accessible, and non-discriminatory;

c. The terms and conditions of any resulting commercial arrangement shall not
constitute Anti-Competitive Behavior; and
The Operator shall comply with the provisions of this Circular, specifically the
responsibilities prescribed under Section 10 hereof.

15.2. Other Relevant TPA Conditions.

a. The TPA arrangement shall encourage a diverse and sustainable market for
Natural Gas beyond the power sector.

b. The TPA shall be anchored on a safe, secure, reliable and efficient operation
for both the Participant and the third-party users or non-Affiliates.

c. Ifan Operator with a TPA arrangement opts to utilize its entire Capacity for own-
use, it shall comply with Section 14 above. On the other hand, if an Own-Use
Operator opts to enter into TPA arrangements, it shall comply with Section 15
above.

In either case, the Operator shall submit the requirements for own-use or TPA,
as the case may be, under the Guidelines for Issuance of Operator's Permit
and the Guidelines for Submission of Reportorial Requirements.

Section 16. DNG Transmission and Distribution Systems as Public Utilities.

DNG Transmission and Distribution Systems that are operating as public utilities shall
be subject to Commonwealth Act No. 146, as amended by RA 11659, otherwise known

as the “Public Service Act,” and other applicable laws and regulations in addition to
this Circular.

Section 17. LNG Storage and Regasification Terminals.

The operation of an LNG Storage and Regasification Terminal shall not be considered
a public utility.

Section 18. Cross Ownership in DNG Facility and Participation in Natural Gas
Trade.

An entity may hold an interest in the ownership and operation of DNG Facilities and
the importation, and supply of Natural Gas to End-Users (including by Aggregators).
Such cross-ownership shall be allowed for operational and financial feasibility

=== dc2024-01-0007-pages-17.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry

Page 17 of 23

considerations; provided, that, Operators and Participants shall fully adhere to
applicable laws and the rules and regulations of the PCC.

Section 19. Fair Access to Capital and Off-Taker Market.

The DOE shall issue applicable policies for the promotion of the financial viability of
the DNG Industry and fair access to the off-taker market which shall consist of different
sectors such as power, industrial, commercial, transport and residential. The DOE
shall provide stakeholders with updates on the plans, programs, and technological
developments in the industry.

RULE VI
DOWNSTREAM NATURAL GAS INDUSTRY COMPLIANCE WITH STANDARDS

Section 20. Compliance Requirement.

DNG Facilities shall be constructed, operated and maintained with due observance of
high quality and efficient service, stringent safety systems, and overall attention to
detail in design, solid construction, and best operational practices. Regulations shall
be consistent with applicable Philippine and Internationally Accepted Standards of the
DNG Industry.

Section 21. Critical Safety Conditions of LNG Ships.

a. The Operator of the LNG Storage and Regasification Terminal and Maritime
Agencies shall require a certification from the LNG vessel operator that the LNG
vessel design, construction, and operations comply with international standards
and codes relating to fitness to travel, hull requirements, cargo containment,
pressure/temperature controls, safety systems, fire protection, and crew
training, among other services.

Marine quality assurance for LNG carriers shall be provided through the
process of vetting, which shall assess ship quality against a known standard to
determine its acceptance for use. Vetting shall be conducted by shipping
companies using employees or independent contractors on their own ships as
well as chartered ships;

b. LNG ship unloading to the LNG receiving facility shall be equipped with

redundant safety systems for emergency shutdown, quick release, containment
and rescue; and

c. Ships must have a comprehensive security plan which shall provide preventive,
detection, alert and rescue system.

Section 22. Critical Safety Conditions of the Facility.

Generally, multiple layers of protection are created for critical safety conditions, all of
which are integrated with a combination of industry standards and regulatory
compliance. Industry standards are written to guide industry and enable public officials
to efficiently evaluate safety, security, and environmental impacts of LNG facilities.

Regulatory compliance should ensure transparency and accountability in the public
domain.

=== dc2024-01-0007-pages-18.ppm ===
DC on Adopting the Amended Rules and Regulations Governing the Philippine Downstream Natural
Gas Industry
Page 18 of 23

The following requirements for primary containment, secondary containment,
safeguard systems, separation distance, industry standards/regulatory compliance,
operational safety and accident, damage and discontinuation of operation standards,
Shall be applied across the DNG Industry, from production, liquefaction, and shipping,
to storage and regasification:

a. Primary Containment.

Employing suitable materials for storage tanks and other equipment and appropriate
engineering design throughout the DNG Industry is the most important safety
requirement for the industry in order to contain the LNG.

b. Secondary Containment.

This second layer of protection ensures that, if leaks or spills occur, the LNG can be
contained and isolated. For onshore installations, dikes and berms should surround
liquid storage tanks to capture the product in case of a spill. In some installations, a
reinforced concrete tank should surround the inner tank that normally holds the LNG.
Secondary containment systems are designed to exceed the volume of the storage
tank. Double and full containment systems for onshore Storage tanks may eliminate
the need for dikes and berms.

c. Safeguard Systems.

In the third layer of protection, the goal is to minimize the release of LNG and mitigate
the effects in case of a release. At this level of Safety protection, LNG operations use
systems such as gas, liquid and fire detection to rapidly identify any breach in
containment including use of remote and automatic shut off systems to minimize leaks
and spills in case of failures. Operational systems (procedures, training and
emergency response) supplement in the prevention and mitigation of hazards, Regular
maintenance of these systems is vital to ensure their reliability.

d. Separation Distance.

Regulations have always required that LNG facilities be sited at a safe distance from
adjacent industrial, communities and other public areas. Safety zones are to be
established by the Operator around LNG ships while underway in Philippine waters
and while moored. The safe distances or exclusion zones are based on LNG vapor

dispersion data, and thermal radiation contours and other considerations as specified
in regulations used by the Operator.

e. Industry Standards/Regulatory Compliance.

No systems are complete without appropriate operating and maintenance procedures
being in place and with insurance that these are adhered to, and that the relevant
personnel are appropriately trained. Organizations such as the Society of International
Gas Tanker and Terminal Operators (SIGTTO), Gas Processors Association (GPA)
and National Fire Protection Association (NFPA) produce guidance which comes from
industry best practices.

=== dc2024-01-0007-pages-19.ppm ===
DC on Adopting the Amended Rules and Regulations Goveming the Philippine Downstream Natural
Gas Industry
Page 79 of 23

f. Safety Standard.

In order to maintain HSSE best practices, policies and regulations in the operation of
the DNG Facility, all operators shall comply with the Philippine and Internationally
Accepted Safety Standards and best practices on areas of design and construction,
management system, operation system, maintenance system, personnel
development and training community health and safety preparedness and emergency
response.

g. Accident, Damage and Discontinuation of Operations.

Should there be an accident, damage or discharges of Natural Gas or hazardous
materials or substances from the DNG Facility, the Operator, in addition to the
obligations stated above, shall promptly inform the DOE Secretary, DNG-REC Chair
and the Director of the OIMB, and submit a preliminary report to the DOE within forty-
eight (48) hours containing relevant information on the initial assessment of the
incident and the emergency response taken.

Within seven (7) days from the submission of the preliminary report, the Operator shall
submit a comprehensive and detailed report to the DOE Secretary, DNG-REC Chair
and the Director of OIMB and the members of the IA-HSSE-IMT containing its official
findings on the damage to the DNG Facility and its corresponding environment and all
other relevant information on the steps taken to resolve and address the cause of the
incident.

Should the Operator and the DOE, in coordination with the IA-HSSE-IMT, determine
that a condition exists in any segment of the DNG Facility which may endanger life or
property, the affected segment or facility shall be taken out of Operation and proper
remedial action shall be taken to prevent further damage and apply subsequent repair
or replacement measures. In all these stages, the Operator shall submit a complete
report and documentation to the DOE.

Section 23. Critical Safety Conditions of Transmission and Distribution Systems
and their Related Facilities.

In addition to the compliance requirement of the safety conditions under Section 24
hereof, the following conditions shall further apply:

a. Impact on Public Infrastructure.

The Operator shall ensure technical and regulatory compatibility to that of other public
infrastructures with proper consultation, coordination and permitting done with other
GovernmentAgencies responsible for any bridges, roads, harbors, streams, rivers and
coastal waterways that will be affected by the pipeline projects.

b. Pipeline Testing.

No pipeline testing shall be done without the presence of, and proper coordination with
the DNG-REC in coordination with IA-HHSE-IMT.

All certificates for hydrostatic tests referred to in this section and all radiographs or
ultrasonic testing results of pipeline welds shall at all times be readily available to a

=== dc2024-01-0007-pages-20.ppm ===
DC on Adopting the Amended Rules and Regulations Goveming the Philippine Downstream Natural
Gas Industry
Page 20 of 23

DOE inspector or its authorized representative and shall not be destroyed or otherwise
disposed of except with the written permission of the DOE.

c. Signage.

In the interest of public safety and welfare, Signs or markers shall be erected and
maintained in strategic locations. The Operator shall advise concerned local
government units (LGUs) and appropriate Government Agencies about the existence
of the pipeline and related facilities within their respective jurisdictions and shall
provide such LGUs and Government Agencies detailed maps of the pipeline routes.

Section 24. Critical Safety Conditions for Natural Gas.

The Operator shall maintain the quality of gas supply to End-Users in accordance with
the Philippine or Internationally Accepted Standards and ensure that delivery of
Indigenous or imported LNG shall always Pass the requirements for purification from
associated compounds that are unnecessary or damaging to the LNG Storage and
Regasification Terminal.

24.1 Measurement of Natural Gas.

Unless otherwise approved by the DOE, the Natural Gas will be measured according
to the relevant standards as developed and maintained by the Organization for
Standardization (ISO) and in particular:

a. The volume of Natural Gas will be measured in cubic meters under standard
conditions specified in Section 24.2 below and all reporting will be in units of
standard cubic meter (SCM);

b. The energy value of Natural Gas will be measured in Joules and all reporting
will be in joules (J) with a quantity prefix, such as megajoules (MJ), terajoules
(TJ), petajoules (PJ), etc., as appropriate; and

c. The mass of Natural Gas will be measured in Kilogram (Kg) under standard
conditions specified in Section 24.2 below.

24.2. Standard Condition.

Standard conditions for the purpose of this Circular shall mean the conditions of
Natural Gas at a temperature of 15.5 degrees Celsius (°C) (288.15 Kelvin) and an

absolute pressure of 1 atmosphere or 0.101325 megapascals (Mpa) or 1013.25
millibars.

Section 25. Critical Safety Conditions for Safety Practice.

The Operator shall submit its HSSE Management Systems, management and
employee structure, manpower component, qualification, and competency/training
development program and mitigation plan to mitigate risks to as low as reasonably
practicable (ALARP) levels in the following areas:

a. Environmental Risk Assessment and Management Plan;
b. Occupational Health and Safety Risk Assessment and Management Plan;