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Oil and gas procurement – Dutch exemption request
Law-Now
20.03.2009
The European Commission has recently announced that it has received a request from the Nederlandse Aardolie Maatschappij B.V. (“NAM”), the biggest oil and gas operator in the Netherlands which is jointly owned by Shell and ExxonMobil, for an exemption from the public procurement rules in relation to activities in that Member State. Those procurement rules require oil companies to put out for competitive tender certain contracts in relation to their oil and gas exploration and production activities in the EU and EEA. Applications for exemption from the rules may be made on a country by country basis. Generally such applications are made by trade associations representing entire industries in the relevant country – it is unusual to see a request from an individual company.
The relevant law is in Directive 2004/17/EC, which requires cross border competitive procurement by entities operating in the water, energy, transport and postal services sectors (the “Utilities Directive”). Companies with licences to engage in oil and gas exploration and production (“E&P”) fall within its scope and are obliged to comply with certain rules. Fortunately for the E&P sector, in some jurisdictions the industry has a derogation from the full rigours of the regime, which means that the rules which operators have to apply are not the detailed set of procedures which most utilities must follow, but simply a set of basic principles based on competitive tenders and non-discriminatory treatment of bidders. This is the case, for example, in the UK and the Netherlands.
However, under Article 30 of the Utilities Directive, the Commission may go further and exempt a particular activity wholly from these rules when the activity in question is directly exposed to competition in markets to which access is not restricted. The UK upstream sector has in the past debated whether or not to apply for such an exemption, as there would seem to be a strong case that the market in the UK is fully competitive. So far the UK industry has decided not to do so, as the rules in their relaxed (derogated) format are not viewed as particularly onerous and may provide some benefits for the supply chain.
The Commission is allowed a period of three months to take a decision on this request, subject to a three month extension, which has been granted so that the Commission must reach its decision by 27 August 2009.
If the Commission grants the requested declaration the effect will be that NAM, and other oil and gas operators in the Netherlands, will no longer have to comply with the rules set out in the Utilities Directive.
It will be interesting to see if a positive response to NAM’s request results in a change of heart in the UK upstream sector.
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