Oil and gas regulation in France: overview

A Q&A guide to oil and gas regulation in France.

The Q&A gives a high level overview of the domestic oil and gas sector, rights to oil and gas, health safety and the environment, sale and trade in oil and gas, tax and enforcement of regulation. It covers transfer of rights; transportation by pipeline; environmental impact assessments; decommissioning; waste regulations and proposals for reform.

To compare answers across multiple jurisdictions, visit the energy and natural resources Oil and gas regulation Country Q&A tool.

This Q&A is part of the global guide to energy and natural resources. For a full list of content visit www.practicallaw.com/energy-guide.

Contents

Domestic sector

1. What is the role of the domestic oil sector in your jurisdiction?

Domestic production

France consumes substantial volumes of hydrocarbons (oil and gas), but only a small amount is produced locally. In 2014, although oil and gas were produced in France through 54 different valid exploration and production permits (concessions), this only covered 1% of France's oil and gas consumption, representing 0.76 million tonnes of oil and 150 million cubic metres of gas.

The exploration and production of shale gas were banned in France by the Law of 13 July 2011 on the prohibition of exploration and exploitation of mines of oil and gas by hydraulic fracturing (see Question 28).

In addition, the French Government announced in 2016 that any new applications for permits to extract hydrocarbons in France would be rejected. This restriction will certainly have a negative impact on France's production of hydrocarbons, which is already scarce.

France does not produce liquefied natural gas (LNG), but has LNG terminals where LNG resources are stored (for example, in Dunkirk, Fos-Tonkin, Fos-Cavaou or Montoire-de-Bretagne).

Oil imports/exports market

France does not export any oil or natural gas. The country is a major importer of hydrocarbons. In 2014, France imported 53.6 million tons of oil, and about 41 billion cubic metres of gas (43% of which came from Norway).

Since 2013, the importation of LNG has dropped severely, due to increased costs of LNG on the Asian market following the Fukushima disaster. This trend is expected to change when the Dunkirk LNG terminal starts operating in 2016.

Domestic market structure

Under French law, oil is a buried fossil resource and therefore belongs to the state, rather than to private landowners. However, private entities can apply to the relevant administrative authority for an exclusive research licence or a concession (see Question 7).

Government policy objectives

France recently committed to a genuine energy transition, seeking to limit as much as possible the exploitation and use of fossil fuels, and to promote the development of renewable energy schemes.

To this end, the Energy Transition Act 2015 (Loi relative à la transition énergétique pour la croissance verte) sets out the key objectives of the new French energy model in a global and European context, which include the reduction of fossil fuel consumption in France by 30% by 2030, compared to the 2012 France's fossil fuel consumption (that is, 101 megatons oil equivalent). To achieve this goal, France's fossil fuel consumption will need to be cut down by 30.4 megatons oil equivalent.

Current market trends

The French hydrocarbons regulatory framework is undergoing several changes:

  • The 13 July 2011 Law on the prohibition of exploitation and exploration of mines of oil and gas by hydraulic fracturing led to the revocation of research permits and projects using the hydraulic fracturing technique.

  • The Energy Transition Act 2015 sets objectives for the reduction of fossil fuel consumption and the development of renewable energy.

  • The French Mining Code is due to be reformed in 2016. This reform has been needed for several years in order to better reflect the rules on environmental protection and the interests of the industry.

See also Question 28.

 
2. What is the role of the natural gas sector in your jurisdiction?
 
3. Are domestic energy requirements met by oil and gas production?

The production of oil and gas in France only meets 1% of the country's consumption (see Question 1).

 
4. Are there specific government policies to encourage the exploration and production of unconventional gas and oil?

There are currently no policies to encourage the exploration and production of unconventional gas and oil. The use of hydraulic fracturing is now banned in France (see Question 1), as France is aiming to conduct its energy transition (see Question 28) by gradually replacing fossil fuels with renewable energy sources.

The only unconventional gas that is currently produced in France is mine gas, although on a very small scale. A concession for the production of mine gas was granted until 2017, and its renewal beyond 2017 is currently uncertain.

 

Regulation

Regulatory bodies

5. Who regulates the extraction of oil and gas?

Oil

Prefects. Prefects (that is, French state representatives in regions and departments) have police powers over research and exploitation mining activities within their territory of competence (Decree of 2 June 2006 on mining rights and underground storage rights). Prefects exercise these powers under the authority of the Ministry for Environment, Energy and Sea.

Hydrocarbons Exploration and Production Bureau (Bureau exploration-production des hydrocarbures). This governmental entity is in charge, together with other authorities, of domain management, and of the valorisation and promotion of hydrocarbons. The Bureau participates in the allocation of exploration licences and concessions.

Geological and Mining Research Bureau (Bureau de recherches géologiques et minières) (BRGM). The BRGM is the leading public institution for the management of resources and risks (for both surface and subsurface resources). In particular, the BRGM is responsible for managing data on oil drilling.

Natural gas

Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE). Created in 2000, the CRE is the main regulatory authority dedicated to the energy sector in France. Its role is to ensure the proper operation of the electricity and gas markets, in accordance with the energy policy's objectives and for the benefit of final consumers.

General Directorate for Competition Policy, Consumer Affairs and Fraud Control (Direction générale de la concurrence, de la consommation et de la répression des fraudes) (DGCCRF). The DGCCRF regulates all relevant energy stakeholders and adopts measures to guarantee the:

  • Conditions for a balanced and transparent operation of the markets.

  • Provision of reliable information to consumers in order to improve their confidence in purchasing energy.

  • Preservation of consumers' health and physical safety.

National Energy Mediator (Médiateur national de l'énergie) (MNE). The MNE acts as an out-of-court intermediary in the settlement of disputes arising out of the performance of contracts entered into by consumers and energy companies. The MNE also plays a key role in informing consumers about their rights in the energy sector.

See box, The regulatory authorities.

The regulatory regime

6. What is the regulatory regime for onshore and offshore oil and gas exploration and production?

The regulatory regime for oil and gas exploration and production in France is set out in the following codes and regulations:

  • The Mining Code (Code minier), which is the main instrument governing the granting of titles and authorisations by administrative authorities, including research permits and concessions.

  • The Environmental Code (Code de l'environnement), which contains provisions relating to:

    • protected natural areas; and

    • applicable standards for the construction of pipelines.

  • Standard technical regulations that may apply to piping, electrical equipment, and so on.

  • The General Regulation of Extractive Industries (Règlement général des industries extractives), which governs the prevention of risks to which workers are exposed, and sets out the applicable health and safety regime.

  • The Town Planning Code and the Heritage Code (Code de l'urbanisme and Code du patrimoine), which provide the legal framework on preventative archaeology.

 

Rights to oil and gas

Ownership

7. How are rights to oil and gas held?

Oil and gas resources are publicly owned and are separate from individual rights of ownership over land (Mining Code). The French Government has the exclusive right to grant licences to explore and exploit oil and gas resources.

Private operators must apply to either the prefect of the relevant department or the Ministry of Energy, for a research permit. Concessions are granted by governmental decree after a public inquiry (see Question 9). Concessionaires have rights to explore and exploit the relevant oil field in order to treat and sell the oil ressources.

Landowners cannot extract and exploit any underground resources without prior administrative approval. Operators that have been granted a concession must compensate landowners for the underground exploration and exploitation through a one-off nominal fee (EUR15 per hectare).

Nature of oil and gas rights

8. What are the key features of the leases, licences or concessions which are issued under the regulatory regime?

Lease/licence/concession term

An exclusive research permit has a limited duration of three to five years. This permit can be extended twice without any competitive procedure, each time for a maximum period of five years (amounting to a maximum of 15 years).

The exploitation of hydrocarbon fields require a concession. Concessions are granted for a period of 25 or 50 years. They can be renewed several times for 25 year-periods.

Fees

Permits are granted for a nominal cost, which is indicated in the order granting the permit. Operators that deal with liquid or gaseous hydrocarbons must also pay:

  • Royalties to the state and local authorities (see Question 11).

  • Compensation to the landowner (redevance tréfoncière), which is calculated on the basis of EUR15 per hectare and paid on a one-off basis.

Liability

Permit holders are the only entities accountable to the public authority for meeting the various obligations under their permit. Other companies can acquire an undivided interest in the permit under a written farm-out agreement with the permit holders, but these companies do not become co-owners of the permit.

An operator can only be excused from liability by proving that damages are due to an external cause, on which it had no bearing. In the event of insolvency of the operator, the state will be held liable towards third parties.

Restrictions

The main restrictions on the issuance of permits relate to environmental concerns. There can also be restrictions if:

  • The application appears to be incomplete.

  • The applicant does not appear to have the technical and financial capability for the exploration and exploitation of the field.

 
9. How are such leases, licences or concessions awarded?

Research permit

Research to find mines can be undertaken under three different regimes (Mining Code):

  • Research can be led by the landowner (or an operator with the landowner's consent) after prior declaration to the prefect of the relevant department.

  • If the landowner refuses to give his consent, the private operator can request authorisation from the prefect of the relevant department. If the authorisation is granted, it cannot be exclusive to the operator that made the request.

  • Under an exclusive research permit, which is the most favourable regime for exploration. It gives the holder an exclusive right to carry out works on the land plot.

An application for an exclusive research permit must be addressed to the Ministry of Energy. Once it has been deemed admissible by the appropriate service of the Regional Directorate for Industry, Research and Environment (Direction régionale de l'industrie, de la recherche et de l'environnement), the research permit application is published in the Official Journal of the French Republic and in the Official Journal of the European Union.

Competing applications are accepted within a period of 90 days following publication of the application. Where necessary, a competitive bidding process between companies will be carried on by the Energy Directorate (Direction de l'énergie) (DE). The DE will request each company to present its project (for example, work programme, geological considerations, financial aspects) in order to assess the seriousness of the applicant. The DE can offer to split the area between several applicants.

After the General Council of Industry Energy and Technology (Conseil général de l'industrie, de l'énergie et des technologies) has issued an opinion on the application, the project can be approved and the research permit granted by ministerial order, without the need for a public inquiry. Details are published in the Official Journal of the French Republic.

Additionally, holders of an exclusive research permit benefit from special treatment under the Mining Code. During the term of the permit, the permit holder can request the permit to be converted into a concession giving rights to exploit discovered deposits. The granting of the concession leads to the cancellation of the exclusive research permit, but the operator retains its right to conduct research within the concession area.

Concession

Concessions are awarded by decree issued by the government, which is preceded by:

  • An opinion from the State Council.

  • A competitive procedure.

  • A public inquiry.

  • A consultation with local administrative services.

  • Advice from the General Council of Industry and Technology.

Before awarding a concession, the Ministry of Energy must also verify that the applicant has sufficient technical and financial capabilities.

Transfer of rights

10. How are oil and gas rights transferred? Are there restrictions on the disposal of interests?

Transfer of rights

Any transfer of a research permit or of a concession requires the prior authorisation of the relevant public authority (Mining Code). Transfers are not subject to competitive procedures.

Farm-out agreement

Research permits and concessions can be leased under farm-out agreements, subject to the prior authorisation of the relevant public authority, without the need of any competitive procedure, public inquiry or opinion of the State Council.

For both permits and concessions, the applicant must fulfil the relevant legal requirements set out in the French Mining Code.

 

Tax

11. What payments are payable by oil and gas interest holders to the government?

Corporate income tax and tax on business profits

For both oil and natural gas, taxable profits of permit and concession holders are subject to corporate income tax, at a rate of 33.3%. Taxable profits that do not fall within the scope of corporate income tax are subject to the tax on business profits, at progressive rates.

Royalties

Departments and municipalities receive royalties on each net tonne of crude oil or natural gas extracted by mining title holders (that is, holders of concessions of mines, farmees and sub-farmees, holders of exploitation permits and explorers of oil and combustible gas mines) (General Tax Code).

Royalties are payable annually. The price of a tonne of oil or natural gas is prescribed by law.

However, there is an exception for hydrocarbons produced from deposits located beyond 200 miles from French territorial waters.

Holders of title over onshore liquid and gaseous hydrocarbons must pay an annual progressive royalty to the state (Mining Code). The rate is calculated based on the volume of production. There is a distinction between recent and old hydrocarbons for the calculation of this progressive royalty.

The same rules apply to offshore deposits holders, which must also pay a progressive royalty to the state. A decree provides detailed rules to determine the royalty rate.

Transportation

Pipelines for natural gas and other hydrocarbons are subject to the flat-rate tax on network companies (Imposition forfaitaire sur les entreprises de réseaux) (IFER) (General Tax Code). Companies that operate these pipelines must pay the IFER annually.

 
12. Does the government derive any other economic benefits from oil and gas exploration and production?

The French Government derives benefits from oil and gas exploration and production through annual royalties on offshore and onshore hydrocarbons output, payable by holders of mining titles (see Question 11). The state used to derive additional profits as shareholder, but the current trend is for the state to withdraw progressively from the capital of French companies producing oil and gas. For example, the state used to hold 79.8% of Engie's share capital (previously called GDF), but currently only holds 33% of its share capital.

 
13. What taxes and duties apply on the import and export of oil and gas?

The following taxes and duties apply on the import and export of oil and gas:

  • Domestic consumption tax on petroleum products (Taxe intérieure de consommation sur les produits énergétiques) (TICPE). The TICPE is due when petroleum products are released onto the market, and is calculated in proportion to the volume of products released. However, certain petroleum products benefit from an exemption or reduction, based on their use and under certain conditions. The TICPE is not applicable in the French overseas territories, as a special consumption tax was introduced to replace it.

  • General tax on polluting activities (Taxe générale sur les activités polluantes) (TGAP). The TGAP is an environmental tax applied to polluting activities that present the highest risks to the environment (for example, the production of waste oil and fossil fuels). The TGAP is payable by producers or importers that put these products on the market.

  • VAT on oil products (Taxe sur la valeur ajoutée des produits pétroliers). VAT is collected by customs authorities. The rate is 20% in the French metropolitan territory. Gas imports are not subject to VAT.

  • Domestic tax on natural gas consumption (Taxe intérieure de consommation sur le gaz naturel) (TICGN). The TICGN is a tax collected by customs authorities and payable based on the quantity of natural gas delivered to a single user. The tax must be paid by:

    • the supplier on delivery to the final consumer; or

    • the final consumer on its own import or production of natural gas.

 

Transportation by pipeline

14. What regulatory requirements apply to the construction and operation of oil and gas pipelines?

Under the Town Planning Code, the construction of oil and gas pipelines may require a building permit from the prefect, depending on the importance of the pipeline (for example, buried pipelines are exempt).

However, a permit is required for the construction and operation of all pipelines that may present some danger or inconvenience (Environmental Code). In these cases, the applicant must submit an application containing a:

  • Safety report outlining the potential risks that may be caused by the pipeline.

  • Risk study.

  • Route map.

A public inquiry reviewing the technical and financial capability of the applicant and an impact study must be carried out before the authorisation is given.

The granting of a permit can be subject to meeting specific criteria set by the relevant public authority (for example, a minimum distance between the pipeline and housing).

If the future pipeline is considered as an infrastructure of general interest, its construction can be declared to be for public use, on the applicant's request. In this case, easements can be granted over the relevant private land, following the payment of due compensation to landowners.

 
15. Is there a system of third party access to pipelines and other infrastructure?

Third party access to pipelines is regulated under French law for the following reasons:

  • Pipelines are considered as "critical infrastructure", because their duplication is difficult and costly. Accordingly, their use cannot be reserved exclusively to the original permit holder.

  • Competition law requires that other operators have access to pipelines at a reasonable cost, in order to be able to undertake their own activities.

Therefore, each decree authorising the construction and operation of a pipeline specifies the conditions of third party access to that pipeline. From the outset of the pipeline's operation, the Minister of Energy will review and approve the conditions offered by the authorisation holder to third parties (including the charges and rates for access), two months before they are implemented.

 

Health, safety and the environment

Health and safety

16. What is the health and safety regime for oil and gas exploration and extraction, and transportation by pipeline?

General Regulation on Extractive Industries (Règlement général des industries extractives) (RGIE)

The RGIE sets out a framework for the prevention of risks that oil and gas industries may face. The RGIE is currently being revised so that its provisions are consistent with those of the Labour Code. The RGIE will then be included in the regulatory part of the new Mining Code, which is currently being drafted (see Question 28).

The RGIE sets out specific requirements for operators undertaking research works that involve drilling. These requirements apply to all types of activities in connection with the works and associated facilities, and include the following:

  • A health and safety document must be produced, which:

    • identifies the potential sources of danger in the workplace;

    • assesses the resulting risks;

    • demonstrates that all appropriate precautions have been taken; and

    • demonstrates that the relevant safety measures will comply with the RGIE.

  • The facilities must be subject to an adapted control device, and wells must be subject to regular testing and control.

  • All premises and workstations must contain at least two emergency escape exits, located as far away from each other as possible, and which lead to a safety zone.

  • Lighting must enable the control room, escape routes, boarding sites and danger areas to remain lit.

  • An appropriate communications system must be made available to employees working in an isolated environment.

  • Safety exercises must be performed regularly.

In addition, specific requirements apply to the following:

  • Works and facilities operating or located offshore.

  • Drilling works and complex interventions carried out within the wells.

  • Gaseous fluid of mines or quarries that are flammable or may release toxic gas.

Labour Code

Since 2009, provisions of the Labour Code relating to health and safety at work can be supplemented and/or adapted in order to take into account the specific characteristics of a particular oil and gas company.

Mining Code

The French Mining Code provides that holders of mining titles must comply with the Labour Code's health and safety regime. However, the Mining Code does not contain any additional requirement in relation to health and safety.

Environmental impact assessments (EIAs)

17. Is an EIA required before extracting or processing onshore or offshore oil and gas?

The French equivalent of an EIA is the environmental impact study (Étude d'impact environnemental) (EIE). An operator intending to carry out works that may cause an environmental hazard must prepare an EIE before undertaking these works (Environmental Code).

The following activities must be subject to an EIE under the responsibility of the project owner (Environmental Code):

  • Drilling.

  • Mining works.

  • Underground storage.

  • Offshore energy production facilities.

  • Pipelines transporting gas.

Once it has been prepared, the EIE is submitted to the competent environmental authority for its opinion. The EIE will be taken into consideration by the relevant public authority before approval is issued (see Question 18).

The construction of oil and gas refineries is subject to specific provisions resulting from the transposition of Directive 2010/75/EU on industrial emissions. This Directive sets out additional requirements for impact studies, providing that they must detail the measures planned to use the best available techniques to minimise environmental pollution.

 
18. What are the different stages of the EIA?

The main stages of an environmental impact study (Étude d'impact environnemental) (EIE) are as follows:

  • The applicant identifies the initial state of the area of interest and its environment.

  • The applicant performs an analysis of the direct and indirect effects of future exploration and production activities on the environment. This study allows for the identification of measures and solutions that will need to be implemented in order to:

    • ensure the safety of drilling operations and a perfect sealing of the wells;

    • protect the surrounding grounds from possible pollution;

    • maintain the quality of the landscape; and

    • limit nuisance relating to supplies and works on the site.

  • The results of the EIE, together with certain additional information required under the Environmental Code, are presented to the General Council for the Environment and Sustainable Development (under the authority of the Minister for Environment) for its opinion.

  • The EIE is transmitted to the competent public authority (that is, the Ministry for Environment for research permits and the government for concessions).

Environmental permits

19. Is there a permit regime for environmental damage or emissions produced during the extraction or processing of oil and gas?

Directive 2010/75/EU on industrial emissions (Industrial Emission Directive)

Due to potentially harmful effects on the environment, the construction of installations classified for the protection of the environment (such as oil and gas refineries) is governed by the Industrial Emission Directive.

The Industrial Emission Directive sets out an integrated pollution prevention and control approach, under which EU member states commit to controlling and reducing the impact of industrial emissions on the environment. The central element of this approach is the implementation of best available techniques (BAT) on the basis of which an emission limit value (ELV) is granted. The ELV specifies the concentration or load of a pollutant allowed to be emitted or discharged into the environment.

BAT are defined as the most advanced and effective developmental stage of the relevant operation activities. They are used by the relevant authorities as a reference when determining the ELV for a particular installation. The ELV must guarantee that emissions do not exceed the levels of emissions associated with the appropriate BAT, under normal operation conditions (Environmental Code).

The Industrial Emission Directive also requires the submission of a baseline report describing the original soil and groundwater conditions. When decommissioning, the operator must restore the site to a state that is comparable to the situation described in the baseline report.

Emissions Trading System (ETS)

The ETS is considered as the main EU tool to fulfil the objective of reducing greenhouse gas emissions by 40% by 2030. This cap and trade system allows companies to sell greenhouse gas allowances if they cut their own emissions, or to buy them if they have insufficient allowances to cover their emissions. The purpose of this incentive is to encourage companies to reduce emissions in order to obtain an additional income stream from the sale of allowances.

Environmental concerns

20. Are there any specific government policies and/or incentives aimed at meeting the environmental concerns associated with the exploration and production of oil and gas?

The DDADUE Law (Loi portant diverses dispositions d'adaptation au droit de l'Union Européenne dans le domaine du développement durable) implements various EU law provisions relating to the safety of offshore oil and gas activities. It modernises the oil and gas framework in France through several measures aimed at:

  • Increasing the protection of the marine environment.

  • Establishing a basic level of security for exploration and operations in offshore oil and gas activities.

  • Improving the mechanisms for public participation and information in the event of accidents.

Under the DDADUE Law, companies wishing to obtain an operation permit for offshore hydrocarbons must demonstrate that they have sufficient financial and technical capacity to deal with the consequences of a potential accident (for example, ensuring prompt compensation of damage caused to third parties and to the environment). The DDADUE Law also creates an obligation to audit installations before the start of the works in order to guarantee the strength of elements critical to the environment and safety, which have been identified during the risk assessment phase.

The production and exploration of shale gas are now banned in France (see Question 28).

Waste

21. What are the regulations on the disposal of waste products resulting from oil or gas extraction and processing?

Environmental Code

Under the Environmental Code's relevant waste classification, waste products arising from petroleum refining and natural gas purification are considered hazardous. The Code sets out the fundamental principles of French waste management policy in the following areas:

  • Waste prevention.

  • Reduction of waste harmfulness.

  • Reusing of waste.

  • Recycling.

  • Raising public awareness of the harmful effects of waste generation and treatment on the environment and health.

  • Restricting storage to "final waste".

Directive 2006/21/EC on the management of waste from extractive industries (Waste Management Directive)

The Waste Management Directive has been incorporated into French law and is aimed at:

  • Preventing or reducing the harmful effects of management of all mine waste facilities (for example, settling tanks) throughout their life cycle.

  • Preventing hazardous accidents and minimising their impact on high-risk waste facilities.

Flares and vents

22. Are flare and vent regulations in place?

"Zero Routine Flaring by 2030" initiative

In 2015, France and 45 other parties signed the "Zero Routine Flaring by 2030" initiative in Paris. Introduced by the World Bank, this initiative brings together governments, oil companies and developmental institutions that have agreed to co-operate to eliminate routine flaring by no later than 2030. Governments that endorse the initiative must provide a legal and regulatory framework to achieve this objective.

Industrial Emission Directive

The Industrial Emission Directive imposes the use of best available techniques (see Question 19), which contribute directly to the reduction of flaring.

Decommissioning

23. What are the decommissioning obligations and liabilities that arise?

Obligations

The termination of operations triggers a reporting procedure, to verify that certain measures have been taken to prevent security breaches. The operator must:

  • Send a declaration to the competent authority six months before the end of operations of the facility (Mining Code). This declaration must be accompanied by plans of the facilities and a statement setting out the measures planned to minimise the risk of harm and disorder to the environment.

  • Carry out an assessment of the impact of the operations and of the termination of works on the environment.

  • Communicate the measures it intends to implement to ensure safety and security and to protect the environment, and indicate what the future use of the site could be.

  • Restore the site to its original state as described in the baseline report (see Question 19) and rehabilitate it for future use, when the installation is an installation classified for the protection of the environment.

The Mining Code is also fully applicable to offshore installations. Additionally, offshore facilities that have ceased operations must be fully removed by their operator (Law of 30 December 1968 on the exploration of the continental shelf and exploitation of natural resources).

Liabilities

The obligation to restore the site rests on the final operator of the installation, which must bear the costs of the environmental clean-up (Environmental Code).

If the operator cannot be traced, the owner of the land that is polluted is accountable for the rehabilitation of the site and for its associated costs, provided that it acted negligently or is "connected" to the pollution.

 

Sale and trade

24. How is trade in oil and gas usually completed?

Gas

The wholesale market refers to the market where gas is traded (bought and sold) before being delivered through the network to final customers (individuals or companies).

Gas trading can be done either:

  • On the intermediated market, including on the stock market (Powernext France) and through stockbrokers.

  • Directly over the counter, under long-term contracts.

Since January 2009, exchanges on the wholesale gas market take place as physical gas deliveries operated through three virtual trading points called gas exchange points (GEP) (that is, the GEP North, GEP South and GEP Southwest).

Oil

Exchanges on the oil market are performed freely (Energy Code). Oil trades take the form of:

  • Physical oil trades on the stock markets (for example, the Intercontinental Exchange or the New York Mercantile Exchange).

  • Transactions of over-the-counter derivatives.

Due to rapid fluctuations of prices, exchanges are commonly organised on futures markets, where payment and delivery are effected at a maturity date after the transaction.

 
25. Are oil and gas prices regulated?

The price of oil varies according to market conditions. It is mainly set by the level of supply of members of the Organization of the Petroleum Exporting Countries.

On the natural gas retail market, there are two types of offers/prices:

  • Market offers, for which prices are set freely by suppliers.

  • Regulated tariffs proposed by the historical supplier, which are set jointly by the Ministries of Economy and Energy following advice of the Energy Regulatory Commission.

Since 2016, regulated tariffs have been abolished for professionals with significant gas consumptions. These customers must now choose their supplier, and tariffs are determined in accordance with the market price. Individuals, and professionals whose consumption is lower than 30 MWh, can still elect to pay regulated tariffs for their gas supply.

 

Enforcement of regulation

26. What are the regulator's enforcement powers?

Prefects

Prefects can make enforcement orders in relation to mining activities (Decree of 2 June 2006). Prefects can order the suspension of works and require the police to intervene (if necessary). The prefects can also prescribe additional works to a licensee.

Energy Regulatory Commission (Commission de régulation de l'énergie) (CRE)

The Electricity Act 2000 (Loi du 10 février 2000 relative à la modernisation et au développement du service public de l'électricité) created a Standing Committee for Disputes and Sanctions (Comité de règlement des différends et des sanctions) (CoRDIS) attached to the Energy Regulatory Commission, which is the relevant regulatory body for gas activities in France.

After an adversarial procedure takes place, leading to a formal notice, the CoRDiS can order sanctions in the case of violation of:

  • Rules regarding access to, or use of, transmission and distribution facilities of natural gas, storage facilities or liquefied natural gas facilities.

  • Unbundling requirements under the French Energy Code.

The CoRDIS can also impose sanctions without prior notice in cases of non-compliance with its decisions.

The CoRDIS can impose the following two types of sanctions (Energy Code):

  • A temporary ban from accessing natural gas structures or facilities, for a period not exceeding one year.

  • A financial penalty depending on the seriousness of the breach, the individual circumstances of the responsible entity, the extent of the damage and the benefits gained from the breach.

 
27. Is there a right of appeal against the regulator's decisions?

Prefectorial orders can be referred to the Ministry for Environment, Energy and Sea, which must take its decision after consulting the General Council of Economy, Industry, Energy and Technologies (Conseil général de l'économie, de l'industrie, de l'énergie et des technologies). A licensee can challenge any additional work requirements before a conciliation commission composed of three members. The commission has two months to issue its opinion.

Decisions of the Standing Committee for Disputes and Sanctions can be appealed before the Court of Appeal of Paris. The party appealing the sanction can also apply for a stay of execution.

 

Reform

28. Are there plans for changes to the legal and regulatory framework?

New French energy model

The Energy Transition Act 2015 sets out key objectives for a new French energy model in a global and European context in order to:

  • Halve the nuclear share of electricity generation by 2025.

  • Reduce greenhouse gas emissions in order to meet the European goal of a 40% decrease (compared to the 1990 baseline) by 2030.

  • Halve France's final energy consumption by 2050.

  • Increase the share of renewable energy in global energy consumption up to 32% by 2030, and up to 40% in electricity production.

  • Reduce France's fossil fuel consumption by 30% by 2030.

  • Reduce the amount of landfill waste by 50% by 2025.

The purpose of this transition is to update the French energy model and tackle climate change, as well as to create local jobs and improve general wellbeing. To this end, the Act sets seven priorities:

  • Renovating existing buildings to save energy.

  • Developing clean transportation.

  • Combatting wastage and fostering circular economy.

  • Developing renewable energy, in particular at a local level, to create a balanced energy mix.

  • Improving nuclear safety and public information.

  • Simplifying and clarifying procedures to increase efficiency and competitiveness.

  • Renewing territorial governance tools.

Hydraulic fracturing

Before the adoption of the Energy Transition Act 2015, France had already prohibited the exploration and exploitation of oil and gas mines by hydraulic fracturing, under the 13 July 2011 Law. This Law led to the revocation of research permits and projects using this technique. Due to its distinct method of extraction, gas obtained by hydraulic fracturing is considered to be an unconventional gas. The main reason for the prohibition of hydraulic fracturing is its potential impact on the environment, due to the:

  • Great amount of water required (up to 15,000 cubic meters per well).

  • Risks of pollution of groundwater and rivers.

  • Large number of wells used, and the impact on the landscape.

  • Lack of transparency on the chemical additives used.

In France, the issue of unconventional gas is still debated because its use could give rise to significant economic opportunities, in particular in terms of employment and the impact on energy prices. In practice, despite the 13 July 2011 Law, some research permits have not yet been cancelled.

The production of oil in France is very low (see Question 1). With oil accounting for over 40% of final energy consumption, the annual cost of oil imports in France is over EUR45 billion. French oil production may well decrease even further, with the Minister of Ecology announcing that all new applications for hydrocarbon research permits on the French territory will be rejected. This measure was taken to:

  • Reach fossil fuel consumption reduction targets set out in the Energy Transition Act 2015.

  • Help re-orientate industrial groups towards renewable energy.

Draft new Mining Code

The draft of the new Mining Code, which was submitted to the government in 2013, was finally submitted for general consultation in March 2015. A reform of the Mining Code has been needed for several years in order to better reflect environmental rules and the interests of the industry.

The draft only contains an outline of the future Mining Code, and proposes that most major changes be addressed by way of ordinance. In a recent statement, the Minister of Ecology announced that a reform of the Mining Code would be presented to the State Council before the summer of 2016. The new Mining Code should:

  • Modernise the French mining model.

  • Ensure the effective implementation of public participation (as defined in Article 7 of the French Environmental Charter, dated 1 March 2005).

  • Improve procedures relating to the health and safety of workers.

  • Strengthen environmental protection.

 

The regulatory authorities

Geological and Mining Research Bureau (Bureau de recherches géologiques et minières) (BRGM)

Address. 3, avenue Claude Guillemin, 45100 Orléans

T +33 2 38 64 34 34

W www.brgm.fr

Main responsibilities. The BRGM is the public institution responsible for the management of resources and risks.

Hydrocarbons Exploration and Production Bureau (Bureau exploration-production des hydrocarbures)

Address. 3, avenue Claude Guillemin, 45100 Orléans

T +33 2 38 64 34 34

W www.behp.net

Main responsibilities. This is the governmental entity in charge of domain management, and of the valorisation and promotion of hydrocarbons.

Energy Regulatory Commission (Commission de Régulation de l'Énergie) (CRE)

Address. 15, rue Pasquier, 75008 Paris

T +33 1 44 50 41 00

W www.cre.fr

Main responsibilities. The CRE is the main energy regulator.

General Directorate for Competition Policy, Consumer Affairs and Fraud Control (Direction générale de la concurrence, de la consommation et de la répression des fraudes) (DGCCRF)

Address. 59, boulevard Vincent Auriol, 75013 Paris

T +33 1 44 87 17 17

W www.economie.gouv.fr/dgccrf

Main responsibilities. The DGCCRF is a Directorate of the Ministry of Economy in charge of controlling compliance with competition and consumer rules.

National Energy Mediator (Médiateur National de l'Energie) (MNE)

Address. 15, rue Pasquier, 75008 Paris

T +33 1 44 94 66 00

W www.energie-mediateur.fr

Main responsibilities. The MNE is an out-of-court intermediary for the settlement of disputes arising out of the execution of contracts with energy companies.



Online resources

Legifrance

W www.legifrance.gouv.fr or www.legifrance.gouv.fr/Traductions/en-English

Description. This website provides access to applicable legislation in France.

Développement durable

W www.developpement-durable.gouv.fr

Description. This website provides information on energy policies in France.



Contributor profiles

Stéphane Gasne, Partner, Projects

Pinsent Masons France LLP

T +33 1 53 53 09 89
M +33 6 35 52 14 16
E stephane.gasne@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. France, Avocat à la Cour; England and Wales, Solicitor

Areas of practice. Construction; oil and gas; energy and infrastructure; project finance; concessions/PPP.

Cyrielle Barbier, Associate, Projects

Pinsent Masons France LLP

T +33 1 53 22 09 44
M +33 6 25 44 18 33
E cyrielle.barbier@pinsentmasons.com
W www.pinsentmasons.com

Professional qualifications. France, Avocat à la Cour

Areas of practice. Construction; oil and gas; energy and infrastructure; project finance; concessions/PPP.

Anaïs De Balorre, Trainee, Projects

Pinsent Masons France LLP

T +33 1 53 53 08 61
E anais.debalore@pinsentmasons.com
W www.pinsentmasons.com

Areas of practice. Construction; oil and gas; energy and infrastructure; project finance; concessions/PPP.


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