6 of October of 2020
Important regulatory changes within the liquid fuel sector

The Ministry of Mines and Energy ("MME") issued Decree 1281 of 2020 (the "Decree") to provide continuity and reliability in the supply and availability of oil-based liquid fuels ("Fuels") throughout the national territory.

Therefore, the Decree mentioned above modify the Sole Regulatory Decree 1073 of 2015, concerning the Fuels sector, as follows:

1. Added article by establishing that the MME may issue the continuity plan regarding Fuels and their mixtures with biofuels, as well as the expansion plan for the polyducts network, based on the projects adopted by the indicative plan for the supply of liquid fuels of the Mining and Energy Planning Unit ("UPME"), that seeks to create a list of projects and services to ensure the supply and reliability of the Fuel chain.
2. Added article, by including the following types of storage for Fuels, biofuels, and their mixtures.  
a. Strategic Storage, understood as the capacity required to guarantee the supply of one or several markets or regions, during a determined period.
b. Commercial Storage, understood as the capacity to carry out continual commercialization activities, and with the purpose of meeting internal demand, guaranteeing the product quality and its continuous supply. 
c. Operational Storage, understood as such required to balance the Fuels supply to maintain a safe, efficient, and suitable operation of the transportation and refining systems and/or import ports or supply plants.

3. Added article, by stating that the MME must issue the regulation to request information and reports related to the operational, logistical, commercial activities, and the physical infrastructure and geographical location of the operational facilities of the agents of the Fuel chain.

4. Added article, pursuant to which the MME will issue the regulation related to the registration and minimum content of the contracts of the distribution chain of Fuels, biofuels, and their mixtures. Therefore, the MME will set the conditions and the period within which the current contracts should meet the requirements set out in this article.

5. Added a paragraph to Article (transportation by polyducts), which states that when an aviation petrol station is served wholly or partially from a polyduct, the MME may indicate the type and use of storage facilities, the associated infrastructure, and the transport charges or remuneration of the activity, as appropriate. 

6. Added article (commercial storage capacity) by indicating that the MME, or the delegated entity, will issue the regulation related to storage capacity and inventory levels.
The current commercial storage capacity in Article will remain in force until the MME issues the above-mentioned regulation. In other words, the minimum storage capacity for the wholesale distributor will continue to be 30% of its monthly dispatch volume from each of its supply plants, calculated according to the average monthly dispatches of the last 12 months prior to the calculation of the storage factor, until the MME issues the new regulation.

In addition to the above, it is worth mentioning that the Energy and Gas Regulation Commission ("CREG"), in use of its power to regulate the activities of refining, import, storage, distribution, and transportation of Fuels, issued Resolution 024 of 2020, by means of which it establish the rules applicable to the commercial relationships between wholesale distributors and retail distributors of liquid fuels with exclusive flagging obligations (the "Resolution"). It is worth remembering that the exclusive trademark representation obligation (abanderamiento) is understood as the obligation of the retail distributor to exhibit the trademark of the wholesale distributor that supplies it, and abstain from selling Fuels from another trademark different from the one it exhibits.

Among the rules established by the Resolution, we list the following:

1. If the scope of the commercial agreement covers products or services other than the Fuels commercialization, the parties must guarantee that the agreement's content does not restrict the independence or condition the Fuels related aspects.
2. The wholesale distributor must keep permanently published on the home page of its official website all procedures, policies, manuals, guidelines, and any other document that is used, and to which reference is made in the commercial agreement, whether for operational, logistical, technical or other purposes, or for the assignment or termination of said agreement.  
3. In case the parties agree to the commercial agreement's automatic renewal, they must include, in a clear, express, and provable manner, the conditions that allow any of the parties not to enforce it.
4. When a commercial agreement includes an assignment clause, it must contain, in a clear, direct, and verifiable manner, the following: (i) the possibility of making the assignment by mutual agreement; and (ii) the option of unilaterally terminating such agreement if one of the parties does not accept the assignment.  
5. The conditions for the termination of the commercial agreement must be clearly and expressly included.
6. Any commercial agreement must include a clause that allows the inclusion of the favorable or unfavorable effects of the variations in the economic and technical components derived from changes in the Fuels regulation, issued after signing the agreement. Likewise, this clause must establish how the burdens associated with such effects are allocated between the parties when new regulatory development impact the agreed conditions, when regulatory changes affect the agreed conditions.
7. It is forbidden to include in the commercial agreement conditions that have the purpose or effect of allowing the wholesale distributor to affect, directly or indirectly, the independence of the retail distributor's business policy vis-a-vis the final consumer.
8. When the retail distributor with exclusive flagging obligation is not vertically integrated (bear in mind that vertical integration exists when the decision-making power of the retail distributor is subject to the will of the wholesale distributor, either directly (affiliate) or indirectly (subsidiary)), with the wholesale distributor, the commercial agreement cannot contain dispositions aiming to force the retail distributor to prefer the wholesale distributor for the renewal of such agreement, or  the sale of the retail distribution business, or any of its related assets.
9. The execution of a commercial agreement between a wholesale distributor and a retail distributor cannot be conditioned to include other service stations of the same retail distributor, unless this condition is agreed upon by mutual agreement.
10. Any commercial agreements in force will continue in effect until their termination date. The parties may not extend the agreement unless it complies with the regulatory provisions of the Resolution.
The Decree can be found at the following link



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