Emne: Spain comments

Fra: Hernández Gutiérrez José Francisco

Dato: Mon, 17 Sep 2007

 

Til: "Erik Rosag"

 



Dear P. Erik Rosaeg,

 

We would like to thank you for the draft of the summary of the work carried out in the Correspondence Group. We have carefully perused the document in order to provide you on time our comments and suggestions.

 

Despite the more detailed comments that will follow in this document, we would like to make note that the discussions have exclusively been developed from a legal point of view. Therefore we consider necessary that security of gas supply, commercial, technical and financial matters are still to be analyzed before being able to come up with an agreed and widely satisfactory position. In our view, any proposed legal development has to take into account the underlying LNG business and its importance for all the parties involved, as it is the case of Spain. It is our position not to undermine the capacity of any nation to guarantee a reliable and competitive gas supply in order to comply with the existing numerous energy and environmental legislation and policies.

 

Comments to the Draft Summary Of The Fisrt Round Of Discussions:

 

         Preamble and paragraph 1.3: we agreed with the wording suggested by Canada and dated 17/08/07 regarding the new wording of the preamble of the paper in the first draft (version 17aug07): "The views expressed in this paper should not be taken as representing the formal position of the delegations or their governments who contributed to the work of the correspondence group". We agree with the point 1.3 as now it is in the report (version 10sep07). .

         Paragraph 2.6: as we have already expressed, our view is that a detailed study about “Option A” is still pending, and not having done it during this discussion round does not imply by any means that there is not a “need for such criteria” as the wording of the paragraph 2.3 of the paper in the first draft (version 17aug07). In fact, we consider that in order to avoid future problems within different National Legislations, including standardization and execution issues, it is urgent to carry out and discuss the proposed studies. We prefer with the paragraph 2.6 as it’s drafted in the report (version 10sep07).

         Paragraph 2.8: securities are to be calculated based on the previous year data and therefore the amounts will be well know (HNS Convention - Article 20). We understand that all products included in the Convention, and not only LNG, will have to deal with misalignment between past and current years (i.e. bankruptcy issue raised by Romania on the 25/07/07) and that no preventive measures are envisaged for any of them. To sum up, it seems to us that this criterium would be an unjustified discrimination between HNS Convention products and the companies involved.

         Paragraph 2.9: this technical matter could be considered in future analysis all together with the rest of the potential securities features such as: feasibility, standardization, cost, etc. In addition, contribution extensions of any kind are not referred in the HNS Convention.

         Paragraph 2.10: still, we consider that a ground and comprehensive study on the matter is needed before being able to reach any conclusion. Partial and aprioristic technical conclusions should not be included in the paper.

         Paragraphs 2.11 and 2.12: it has been argued that being against “the spirit of the Convention” is not an allegation to refuse appointing the receiver as surety. Accepting that “the spirit of the Convention” could have more than a single interpretation, we understand that the only not possible interpretation is to consider the exception as a general case. Therefore we would like to emphasize the idea that there is an exception for LNG cargos that has to be considered and accomplished. Otherwise, as several Correspondents have alleged, we might be incurring in fraud.

 

Comments to the first draft (version 17aug07),Other points” (Paragraphs 2.10-12:

 

We are pleased with last version (10sep07) where some paragraphs have been deleted in respect to the first version (17aug07). Nevertheless, hereafter we express our comments to those deleted paragraphs:

 

         Paragraph 2.10: we would like to note that this will only be possible under certain commercial structures (i.e. new contracts or spot contracts), but modifying current long-term contracts does not seem to be a feasible option. Furthermore, changing the Incoterm from DES to DAF as a solution to the problem as suggested will certainly generate different commercial problems that are not to be neglected (i.e. maritime transportation cost sharing, risk transfer, port costs, maritime insurance costs and contractual structures, etc.)

         Paragraph 2.11: we would like to see stated as well under this point that the Convention declares the State Party as the only liable party for reporting. However, an standardized procedure in collaboration with companies located in the Contributing States could be agreed (i.e. implementation of the proposed HNS CCCC)

         Paragraph 2.12: please note that conditions precedent to the discharge of a cargo are an extreme measure that seems to be unacceptable due to its huge impact all through the LNG and natural gas value chain. As we mentioned to the Correspondence Group on the 20/07/07: “We support all initiatives that could be implemented as long as they do not interfere with normal business operations […]”.

 

Comments to the Draft Resolution:

 

Based on our previous comments we kindly ask you to:

         DELETE in Point 1making the receiver of a cargo of LNG the surety of the obligation  to pay the contribution

         REPLACE in Point 1requiring security” by “evaluating the feasibility of requiring different types of securities

         ADD a Point 4 statingthat all States Parties are encouraged to collaborate in the elaboration of harmonized national legislations.

         ADD a Point 5 statingthat any measure to be implemented in order to guarantee the contribution to the HNS Fund will not interfere with or undermine normal LNG business operations.

 

Finally, please note that for the sake of good order and in the benefit of the discussion, we would suggest not to include in the draft summaries and resolution papers new contributions or ideas before sharing them in advance within the Correspondence Group.

 

Very best regards,

 

Jose Hernandez

        ++++++++++++++++++++++++++++++++++++++++++++++++++++++++++