Introduction

The Government of Pakistan, through the Ministry of Petroleum and Natural Resources, promulgated the Compressed Natural Gas (CNG) (Production and Marketing) Rules, 1992. These rules, notified on May 13, 1992, establish the regulatory framework for the production, compression, and marketing of CNG in Pakistan. This article provides a detailed analysis of these rules, highlighting their key provisions and implications for stakeholders in the CNG sector.

Key Provisions

1. Short Title and Commencement These rules are cited as the Compressed Natural Gas (CNG) (Production and Marketing) Rules, 1992, and they came into force immediately upon notification.

2. Definitions The rules provide detailed definitions for key terms used throughout the document, ensuring clarity and consistency. Notable definitions include:

  • Area of Operation: The authorized area within which a licensee can compress and distribute CNG.
  • Authority: The Oil and Gas Regulatory Authority (OGRA), established under the OGRA Ordinance, 2002.
  • Consumer: Any individual or corporation supplied with CNG for their automotive use, excluding those involved in storage, processing, filling, sale, or distribution of CNG.
  • Licensee: A person or corporation holding a license under Part II of these rules.

3. License Compulsory No person or corporation can undertake or cause to be undertaken any operation or construction of works connected with the compression of natural gas for storage, filling, or distribution of CNG without first obtaining a license from the Authority.

4. Application for License Applicants must submit a triplicate application to the Authority, accompanied by a fee of Rs. 25,000. If the license is refused, half of the fee is refunded.

5. Consideration of Application The Authority considers applications based on public and national interest, as well as the financial and technical competence of the applicant. The Authority may require changes to the plans and details submitted.

6. Grant or Refusal of License The Authority has the discretion to grant or refuse a license, specifying any terms and conditions deemed necessary. If refused, an appeal can be made to the Federal Government.

7. Period of License Initially valid for up to two years, during which the licensee must execute the works. Upon satisfactory completion, the license can be extended up to fifteen years. Licenses can be renewed for five-year periods with a fee of Rs. 25,000.

8. Revocation or Amendment of Licenses The Authority may revoke or amend licenses for reasons such as prolonged default, violation of terms, or insolvency of the licensee. Appeals against such decisions can be made to the Federal Government.

9. Transfer of License or Works Licensees cannot sell, assign, transfer, or lease their license or works without the prior written approval of the Authority.

10. Execution of Works Licensees must execute their works within two years or within an extended period allowed under special circumstances. Third-party inspectors appointed by the Authority will verify the works, with fees payable by the licensee.

11. Additions to Works Any alterations, additions, or extensions to the works must be authorized by the Authority.

12. Discontinuation of Supply Licensees may temporarily discontinue the supply of CNG for maintenance purposes.

Charges and Accounts

13. Price of CNG The price of CNG sold to consumers is to be determined by an agreement between the licensee and the consumer.

14. Measurement The amount of natural gas supplied to a licensee and CNG supplied to a consumer must be measured accurately using a correct meter, which must comply with conditions prescribed by the Authority.

15. Willful Hindrance No licensee or consumer shall obstruct the making, submitting, or keeping of required records or accounts.

General Provisions

16. Entry, Inspection, and Enforcement The Authority or authorized persons may inspect and examine any place where CNG-related works are conducted to ensure compliance with these rules.

17. Protection for Acts Done in Good Faith The Authority is protected from legal proceedings for actions taken in public interest under these rules.

18. Protection to Public No new CNG refueling stations can be located in residential areas. Licensees must comply with safety regulations to avoid public health or safety dangers.

19. Marking of Works Licensees must mark their works with conspicuous signs.

20. Penalty for Breach of Rules Breaches of these rules are punishable with fines up to fifty thousand rupees.

Critical Analysis

The CNG (Production and Marketing) Rules, 1992, and their subsequent amendments have provided a structured regulatory framework for the CNG sector in Pakistan. However, several areas warrant closer scrutiny:

1. Bureaucratic Challenges: The extensive application and approval process, coupled with the need for multiple inspections and authorizations, can lead to bureaucratic delays, potentially discouraging new entrants and investors.

2. Regulatory Burden: The requirement for detailed compliance with numerous safety and operational standards imposes a significant regulatory burden on licensees, which could increase operational costs.

3. Appeal Processes: While the provision for appeals to the Federal Government provides a recourse for aggrieved applicants or licensees, the process can be time-consuming and may not always result in timely resolutions.

4. Public Safety: The rules emphasize public safety, particularly regarding the location of CNG refueling stations. However, enforcement of these safety standards requires robust monitoring and compliance mechanisms, which can be challenging in practice.

Conclusion

The Compressed Natural Gas (CNG) (Production and Marketing) Rules, 1992, establish a comprehensive regulatory framework aimed at ensuring the safe and efficient production, compression, and marketing of CNG in Pakistan. While the rules provide clear guidelines and enhance public safety, they also impose significant regulatory requirements and procedural complexities. Stakeholders in the CNG sector must navigate these regulations carefully, ensuring compliance while advocating for any necessary reforms to streamline processes and reduce bureaucratic hurdles.

For further insights and assistance with compliance or navigating the regulatory landscape, please contact Josh and Mak International. Our experienced legal professionals are here to provide expert guidance and support.

By The Josh and Mak Team

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