# DC2017-11-0012 — Philippine Downstream Natural Gas Regulation (Original PDNGR) **Department Circular No. DC2017-11-0012** "Rules and Regulations Governing the Philippine Downstream Natural Gas Industry" Issued: November 2017 | Secretary: Alfonso G. Cusi (DOE-AGC-17005568) Effective: ~December 2017 (15 days after publication in 2 newspapers) Source: raw/_ocr/regulations/dc2017-11-0012-p001-p020.txt, p021-p040.txt, p041-p055.txt Main text: 23 pages (Rules 1–21); Annexes A–C: pages 24–55 Legal basis: RA 7638 (DOE Act of 1992); EO 66 (DOE as DNG lead agency); AO 38; DC 95-06-006; DC 2002-07-004; EO 30 (EICC). Repeals: DOE Circular 2002-08-005 (Interim Rules on Transmission, Distribution and Supply of Natural Gas). Superseded by: DC2024-01-0007 (January 17, 2024). --- ## PART I — GENERAL PROVISIONS ### Rule 1. Title and Scope **Section 1.** This Circular is the "Philippine Downstream Natural Gas Regulation (PDNGR)." **Section 2.** Scope: (a) Industry compliance on siting, design, construction, expansion, modification, operation, and maintenance of any Project in the PDNGI Value Chain; (b) Industry compliance on importation of LNG and supply/transport of: (1) imported LNG or liquefied Indigenous Natural Gas from loading arm connection to LNG Terminal, Transmission System, and Distribution System; (2) Indigenous Natural Gas after point of sale to the Customer; (3) LNG from storage filling connection to satellite LNG Terminal in the Philippines or foreign market; (c) Compliance on TPA; (d) Compliance towards developing the Philippines as an LNG trading and transshipment hub for the Asia-Pacific Region; and (e) Overall monitoring and supervision of the PDNGI Value Chain. ### Rule 2. Declaration of Policy (a) Provide conducive environment for promotion and development of the PDNGI Value Chain — safe, transparent, competitive, and environmentally friendly; (b) Ensure continued operation of currently operating gas-fired power plants after the depletion of the Malampaya Natural Gas supply; (c) Promote Natural Gas as an energy fuel to satisfy local demand and develop necessary infrastructure for LNG trading and transshipment hub; (d) Promote conversion of existing liquid fuel-operated machines to Natural Gas use; (e) Ensure access and financial viability by liberalizing entry under competition, transparency and fair trade; and (f) Ensure compliance with HSSE standards and best practices. ### Rule 3. Responsibilities of the DOE DOE shall have overall responsibility on promotion, supervision, development and operation of PDNGI Value Chain through: (a) Evaluation of applications for NTP, PCERM, and POM; (b) Issuance of Acknowledgement to Import (ATI) LNG and Acknowledgement to Supply and Transport (AST) Natural Gas; (c) Issuance of directives to qualified Government Agencies as investing arms to catalyze development; (d) Implementation of industry compliance with Philippine or International Standards; (e) Creation of DNG-REC to evaluate and recommend applications; coordination with PIA-HSSE IMT; creation of Technical Committees (TC) to formulate standards; and (f) Implementation of all other necessary measures. ### Rule 4. Definition of Terms Key definitions (differences from DC2024 noted): | Term | DC2017-11-0012 Definition | |------|--------------------------| | Applicant | Local/foreign individual company, incorporated JV, or designated member of unincorporated JV/consortium authorized to engage in a Project | | Capacity | Maximum capacity of Natural Gas Facility, expressed in normal cubic meters per time unit or energy unit per time | | Customer | Person who purchases Natural Gas for resale or final use | | Distribution Pipeline | Pipeline forming part of Distribution System, including Spur lines | | Distribution System | Pipeline and related facilities used to transport Natural Gas from last delivery points of Transmission System to last connection point to Customer | | Downstream Natural Gas Facility | Facilities in Rule 6 including pipelines for transporting Indigenous Natural Gas after point of sale to last connection point to Customers | | Force Majeure | Acts of God, strikes, inability to access land, enemy acts, fire/explosion, epidemic, court orders, government failure to issue permits | | Franchise | Right, privilege, and authority issued by **Congress** to engage in transmission or distribution of Natural Gas (note: DC2017 required congressional franchise for pipeline public utilities — this requirement was changed in DC2024) | | GSPA | Gas Sales and Purchase Agreement — contract for delivery and sale of Indigenous or imported Natural Gas | | Importer | Person registered with DOE to import LNG into the Philippines | | Indigenous Natural Gas | Natural Gas produced from fields within territorial jurisdiction of the Philippines | | LNG | Natural Gas liquefied by cooling at cryogenic temperature | | Natural Gas | Gas from boreholes/wells: primarily methane, ethane, propane, butane with minor heavier hydrocarbons, nitrogen, sulphur compounds, water, CO2, H2S (impurities removed before liquefaction) | | Operator | Natural or juridical Person granted a Permit by DOE to engage in siting, design, construction, expansion, rehabilitation, modification, operation, and maintenance of Natural Gas Facilities | | PDNGI Value Chain | Downstream Natural Gas Facilities and operations/activities involving LNG importation, storage, regasification, transmission, and distribution to Customers; includes Indigenous Natural Gas pipelines after point of sale | | Supplier | Person registered with DOE to trade and supply Natural Gas to Customers | | TPA | Transparent and non-discriminatory access by third party users of the **excess capacity** and other services offered by the Operator (note: applied only to excess capacity, not entire capacity — different from DC2024) | | Tolling Fee | Capacity payments + operating expenses + taxes + other costs for receiving, storing, regasifying LNG, and delivering to Customer | | Transshipment | Transfer of cargo from one vessel to another before reaching destination | --- ## PART II — COVERED FACILITY ### Rule 5. Downstream Natural Gas Facility **Section 1. LNG Terminal:** Jetty and unloading/loading arms; cryogenic pipelines; storage tanks; send-out system; low and high pressure pumps; BOG compressors and re-condensers; vaporizers; metering; and other relevant components. **Section 2. Pipelines:** Transmission; Distribution (including Spur lines); and other relevant components. **Section 3. Transmission and/or Distribution-Related Facilities:** Processing plants; pipeline interconnections and metering; Natural Gas Refilling Stations; and other relevant components. **Section 4. Indigenous Natural Gas Facility:** Pipelines and related facilities to transport Indigenous Natural Gas after point of sale to last connection point to Customers. --- ## PART III — REGULATIONS AND STANDARDS ### Rule 6. Permits No Person shall construct, expand, rehabilitate, modify, operate, or maintain a Downstream Natural Gas Facility without a Permit issued under this Circular. **Section 1. Permit Types:** (a) Notice to Proceed (NTP) (b) Permit to Construct, Expand, Rehabilitate, Modify (PCERM) — note: DC2024 separated these into distinct PTC, PTE, PTR, PTM permits (c) Permit to Operate and Maintain (POM) **1.1 Guiding Principles:** DNG-REC recommends all Permits for approval of the **Secretary** (all types, not just PTC/POM as in DC2024). Criteria: consistent with policies; complete legal/technical/financial submissions; technically and financially viable; sufficient market and supply; no Anti-Competitive Act. **1.2 Periods and Procedures:** - See Annex A for detailed procedures (working-day timelines) - NTP period: 6 months from date of issuance, extendable up to 6 more months on Force Majeure - POM: initial period of 25 years, renewable up to 25 more years Force Majeure extension: Operator must notify DNG-REC within 30 days with proof and proposed amended work program. **1.3 Modification:** DNG-REC may recommend modification of Permit conditions for DOE Secretary approval. **Section 2. Natural Gas Supply:** (a) Government may sell directly or authorize petroleum service contractor to sell Indigenous Natural Gas; DOE Secretary evaluates gas sale and purchase agreements; (b) Operator of LNG Terminal shall ensure accommodation of both Liquefied Indigenous Natural Gas and imported LNG; DOE shall support upgrading of terminal into international trading and transshipment hub. **Section 3. Accreditation and Reportorial Requirements:** (a) Importer and Supplier complying with Annex C Guideline issued LNG Importer Accreditation Certificate (LNG-IAC); qualified to apply for ATI-LNG and AST-NG; (b) Operators and facilities registered; reportorial requirements submitted to OIMB per Annex B. **Section 4. Application Fee:** Non-refundable fee per latest DOE Approved Schedule of Fees and Charges. **Section 5. Confidential Information:** DOE shall not use confidential information for other purposes; protects confidential or commercially sensitive information unless allowed by Operator or required by law. **Section 6. Rules of Practice:** Legal proceedings follow DC2002-07-004 (Rules of Practice and Procedure before DOE); Rules of Court apply suppletorily. ### Rule 7. Franchise Requirement **Section 1.** Transmission and/or Distribution Pipelines **functioning as Public Utility shall require a congressional franchise** and certificate of public necessity and convenience or similar executive authorization. (Note: this was the original framework. DC2024-01-0007 revised this to require only compliance with Public Service Act/CA 146 as amended by RA 11659; RA 12120 went further and eliminated franchise requirements entirely, requiring only a DOE Permit.) **Section 2. Public Utility Pipeline Service Pricing:** DOE in coordination with ERC responsible for fixing and regulating rates for Transmission and/or Distribution Pipelines functioning as Public Utility. **Section 3. Ownership Requirement:** Congressional Franchise as a Public Utility must only be granted to Persons complying with Article XII, Section 11 of the 1987 Philippine Constitution (60% Filipino ownership requirement). ### Rule 8. Third Party Access **Section 1. Guiding Principles:** Excess Capacity of LNG Terminal, Transmission System, Distribution System available on transparent, non-discriminatory basis. TPA guidelines to be subsequently issued based on principles: encourages competition; supports foreign and local investments; promotes diverse energy sources; introduces measurable standards; Operator must consult existing and potential third party users; Operator must publish access terms and conditions. **Section 2. Available Excess Capacity:** TPA applies only to available and uncommitted **excess capacity** (not entire capacity). Operator determines maximum and excess capacity subject to DNG-REC review and DOE Secretary approval. Excess capacity allocated based on: proposed contract price; credit-worthiness; existence of off-take facility; ability to meet fuel specification parameters. Non-availment of allocated excess capacity is not a ground for cancellation of Permits. **Section 3. Infrastructure Development Period (IDP):** To encourage initial capital investment in new infrastructure, an IDP shall be considered and determined during which the Operator is **exempt from TPA obligations**. The IDP also applies to significant capacity increases in existing facilities and modifications to enable new gas supply sources or new gas markets. (Note: This IDP TPA exemption was removed in DC2024-01-0007 and DC2025-04-0005.) ### Rule 9. Promotion of Competition and Natural Gas Retail Pricing **Section 1. Guiding Principle:** (a) Commercial operations shall be competitive, transparent, and governed by market forces; (b) Price-fixing and output-fixing agreements prohibited; (c) Practices that undermine, restrict, or distort competition prohibited; and (d) DOE Secretary shall adopt measures recommended by PCC to maintain competition. **Section 2. Cross-Ownership:** Cross-ownership from Natural Gas Facilities, operations, importation, and supply allowed for operational and financial feasibility; applicable laws and regulations apply. **Section 3. Natural Gas Retail Pricing:** Retail price of Natural Gas converted from LNG is **deregulated**, except for Public Utility operations. Pricing shall be unbundled into: (1) Landed Cost of Natural Gas and (2) Tolling Fee. ### Rule 10. Standards of Facility, Product and Safety Practice **A. Facility (Sections 1–4):** High quality, efficient service, stringent safety, best operational practices. Philippine or International Standards. LNG vessel safety certification, vetting, security plans. Multiple layers of protection: primary containment, secondary containment (dikes/berms), safeguard systems, separation distance, industry standards compliance, accident/damage reporting. **Accident Reporting (same as DC2024):** - Preliminary report within **48 hours** - Comprehensive report within **7 days** **Pipeline Safety:** No pipeline testing without presence of DNG-REC and PIA-HSSE-IMT. Hydrostatic test certificates and UT results always available to DOE inspector. Signs and markers in strategic locations; detailed maps to LGUs and agencies. **B. Product (Sections 1–3):** Gas quality per Philippine or International Standards. Volume in SCM (ISO standards); energy in Joules. Standard conditions: 15.5°C (288.15 K), 0.101325 MPa / 1013.25 millibars. **C. Safety Practice:** HSSE Management Systems covering: Environmental Risk Assessment and Management Plan; Occupational Health and Safety Risk Assessment and Management Plan; Facility Security Risk Assessment and Management Plan; Disaster/Emergency Preparedness and Response Plan. ### Rule 11. Responsibilities of the Operator Align goals; bear direct responsibility for construction and operation; comply with Philippine laws on tax, labor, health, safety, indigenous people's rights, environment; comply with standards; comply with Permit scope and Internationally Accepted Standards; provide Insurance Policy; submit abandonment plan and sinking fund; comply with assignment or transfer rules; allow BIR and BOC entry; allow DOE and PIA-HSSE IMT entry; give preference to local talent and companies; hold DOE harmless from claims arising from compliance failure; participate in regular operational meetings with DNG-REC. ### Rule 12. DNG-REC Created by this Circular. Functions: (a) Examines, evaluates, recommends to Secretary the issuance of NTP, PCERMs, and POMs; (b) Recommends directives to qualified Government Agencies as investing arms; (c) Recommends standards and policies on facility, product, and safety practice; (d) Supervises and monitors progress of construction and operation; authorizes inspections in coordination with PIA-HSSE IMT; (e) Addresses inquiries raised by Secretary; (f) Recommends rates or schedule of prices for Transmission/Distribution Pipelines (in coordination with ERC); and (g) Resolves issues on Applicants' legal, technical, and financial capabilities. --- ## PART IV — TRANSITORY PROVISIONS ### Rule 13. Existing Systems Natural Gas Facilities constructed before effectivity continue to operate under existing Permits and comply with additional requirements. Suppliers under existing GSPAs continue operations subject to additional requirements. ### Rule 14. Pending Applications All pending applications before DOE covered by this Circular. --- ## PART V — FINAL PROVISIONS ### Rule 15. Insurance, Abandonment, and Assignment **Section 1. Insurance:** Insurance policy provided to DOE within 60 days from date of PCERM and POM. **Section 2. Abandonment and Decommissioning:** (a) Operator submits abandonment plan and establishes sinking fund (trust account with reputable Philippine bank in favor of DOE) equivalent to estimated abandonment cost, starting 3 years before end of POM term (if no renewal) or on immediate withdrawal; (b) No facility abandoned without prior written DOE authorization and DOE-approved abandonment plan per Philippine or International Standards. **Section 3. Assignment or Transfer of Interest of Operatorship:** Only upon prior written DOE Secretary approval per Annex A Guideline 7.a.4. ### Rule 16. Consultation and Arbitration Parties (DOE and Operator) make best efforts to amicably settle disputes. Disputes that cannot be settled amicably shall be settled by **arbitration**: - Each Party appoints one arbitrator within 30 days of written request; two arbitrators appoint a third; - If either Party fails to appoint, President of International Chamber of Commerce (ICC) appoints; - **Venue: Singapore**; Language: English; - Decision of majority is final and binding; judgment may be entered in any court having jurisdiction. - Arbitration conducted under ICC Rules of Arbitration. (Note: This Rule 16 arbitration provision was removed in DC2024-01-0007, which instead relies on DOE administrative proceedings under DC2002-07-004.) ### Rule 17. Incentives DOE offers incentives through BOI pursuant to EO 226 (Omnibus Investments Code of 1987) or RA 7916 (Special Economic Zone Act of 1995). (Note: Pre-SIPP/CREATE framework; updated in DC2024 to reference RA 8424 Title XIII.) ### Rule 18. Offenses and Penalties **Section 1. Offenses:** Violation of: (a) any section or rule; (b) any Permit condition; (c) any relevant DOE order. **Section 2. Penalties:** Per existing laws; each day of non-compliance = separate violation. DOE may suspend or cancel Permits; may recommend cancellation of other agencies' permits. **Section 3. Enforcement:** DOE investigates motu proprio or upon sworn written complaint per DC2002-07-004. ### Rule 19. Repealing Clause **DOE Circular 2002-08-005** (Interim Rules and Regulations Governing the Transmission, Distribution and Supply of Natural Gas) and inconsistent rules are hereby repealed. ### Rule 20. Separability Clause Invalid or unconstitutional provisions shall not affect remaining provisions. ### Rule 21. Effectivity Effective 15 days after complete publication in at least two newspapers of general circulation and submission of copy to UP Law Center. --- ## ANNEX A — PERMIT APPLICATION GUIDELINE *20 pages (PDF pp. 24–43). Full documentary requirements and processing timelines for NTP, PCERM, and POM.* **DNG-REC Composition (Annex A, §2):** | Role | Position | |------|---------| | Chair | Supervising Undersecretary, OIMB (or as designated by DOE Secretary) | | Vice Chair | Supervising Assistant Secretary, OIMB (or as designated) | | Members | Director, OIMB; Director, Legal Services (LS); Director, Financial Services (FS); **Director, Information Technology and Management Services (ITMS)** | Note: ITMS was included as a 4th member in the original 2017 PDNGR. DC2024-01-0007 removed ITMS from the DNG-REC composition. **DNG-REC Secretariat (Annex A, §4):** Head = Assistant Director, OIMB; Members = Head NGMD/OIMB; Head Downstream Conventional Energy Division/LS; Head Downstream Conventional Energy Division/FS; Head Information Services/ITMS. **Processing Timelines (working days):** | Stage | NTP | PCERM | POM | |-------|-----|-------|-----| | DNG-REC: completeness check | 30 wd | — | — | | DNG-REC: substantive evaluation | 45 wd | — | — | | DOE Secretary: decision | 15 wd | 15 wd | 15 wd | | NTP period | 6 months (extendable 6 months) | — | — | | POM period | — | — | 25 years (renewable 25 years) | Note: DC2024-01-0007 replaced these working-day timelines with 15cd+45cd+15cd (calendar days). DC2025-04-0005 (IRR) streamlined further to 3wd+12wd+5wd. **Schedule of Fees (Annex A-1, CY 2013):** - Pipeline construction permit: ₱10 per meter - LNG terminal and related facilities permit: ₱113,000 per project application - Supply of natural gas permit: ₱93,000 per project application - Other facility permits: ₱81,000 per project application - Annual regulation fee: ₱41,000 per facility --- ## ANNEX B — OPERATOR AND FACILITY REGISTRY AND REPORTORIAL REQUIREMENTS GUIDELINE *2 pages.* Monthly progress reports for NTP and PCERM holders (due 15th of succeeding month); annual facility update report for POM holders (due January 15); monthly operation reports for POM holders; lost-time incident reports within 24 hours. --- ## ANNEX C — IMPORTER AND SUPPLIER ACCREDITATION GUIDELINE *6 pages + certificate forms (Annexes C-1 through C-4).* Importer and Supplier accreditation — 15-year validity renewable 30 wd before expiration. **Participant Types (original PDNGR):** Only **Importer** and **Supplier**. (Note: DC2024-01-0007 added Aggregator, Reseller, and Bunker Trader as distinct participant types. The 2017 PDNGR had no aggregation or reselling categories.) ATI-LNG: pre-importation notice 7 wd before loading; post-importation notice 20 wd after unloading. AST-NG: similar notice for supply and transport; monthly monitoring reports due 15th of succeeding month.