Frequently Asked Questions (FAQs) on REMIT transaction reporting
XXX is considering to supply (i.e. sell) liquefied natural gas (LNG) to wholesale customers by means of LNG trucks. For this purpose, XXX will enter into one or more LNG sales agreements with one or more wholesale customers.
Do the above-mentioned LNG sales agreements between XXX and its wholesale customers qualify as transactions which are required to be reported to ACER in accordance with Article 8(1) of REMIT in conjunction with Article 3 of REMIT Implementing Regulation (EU) No 1348/2014?
Example: XXX will transport and deliver the LNG sold under such agreements to these wholesale customers by means of LNG trucks (i.e. in trucks that are suitable for the transportation of certain volumes of LNG).
Please note that the delivery point is neither the truck loading facility nor the fuelling station but it is potentially any physical point between the truck loading facility and the flange of the unloading facility where the LNG has to be delivered (and possibly re- gasified) on behalf of the wholesale customer.
As already expressed by ACER in the FAQs on fundamental data and inside information document (Q. 3.2.2) “LNG truck loading is out of scope for reporting fundamental data reporting. For the same reason, the Agency believes that transaction for the supply to LNG trucks are non-reportable.”
Given that, in our opinion it is not entirely clear, reason for which we are asking a further clarification, what “supply to LNG trucks” means exactly in this context (supply to trucks might mean from storage to truck or from a fuelling station to an LNG powered truck).
In our opinion any transaction where LNG is delivered either “to truck” or “by truck” or “in truck” has not to be reported.
In the FAQs on transaction reporting document (Question II.3.1.26) it is written:
“The Agency has already clarified in the FAQs on fundamental data and inside information document (Q. 3.2.2) that LNG truck loading is out of scope for reporting fundamental data reporting.
For the same reason, the Agency believes that transaction for the supply to LNG trucks are non-reportable.”
Please note that this answer only addresses the “loading” of LNG trucks issue raised in Question 3.1.26:
“Downstream LNG transactions, for example LNG truck loading and LNG marine fuel deliveries. These transactions are in scope as they are understood to take place at or after the entry flange of an EU LNG regasification terminal. Similar guidance to pipeline gas applies for reporting.”
However, the case described in Question II.3.1.26 is different than the one described in the above question.
In general, if the LNG is sold to a truck, it may not be reportable – see Question II.3.1.26. However, if the LNG is sold from the truck to any system connected to the network (e.g. National Transmission System, Distribution Network, LNG facility, storage etc.), then the contract would be reportable.
In any case when the contract counterparties are already REMIT market participants and if there are any doubts regarding the reporting, we would recommend to report the transaction, even if the other counterparty would not do so.
In this case the reporting market participant(s) would not take the risk of not reporting a reportable contract according to REMIT. The EIC for the destination delivery point (or the National Transmission System, Distribution Network, LNG facility, storage etc. connected to) can be reported in this case.
What constitutes "delivery" for the purposes of REMIT? We are particularly interested in what constitutes the delivery in the context of LNG supplies.
According to ACER's Q&A (III.3.36), "ACER considers any importation or offloading of LNG in any LNG facility (including flanges that connect the LNG vessel to the LNG terminal) in the EU as delivery in the Union as far as the delivery of the product takes place in the European Union". This suggests that "delivery" means the physical delivery of the product.
However, in FAQ #3.1.21, ACER states that "in the Agency's view contracts for the supply of LNG before the entry flange of an EU LNG regasification terminal, for example an exchange of title on the high seas outside the EU, are not subject to transaction reporting". This suggests that title transfer constitutes delivery of the product.
We note that Incoterms definitions, which are commonly used in the LNG sector, of delivery relate to the physical delivery / transfer of risk and are silent on transfer of title, separating the concept of delivery into two.
For example, In a DES transaction "delivery" occurs at the time when the goods are placed at the disposal of the buyer on board the vessel at the named port of destination in such a way as to enable them to be removed from the vessel by the buyer.
At the point of delivery, the risks transfer from the seller to the buyer.
In a DES scenario, delivery is tied to the physical delivery / transfer of risk, and not to the transfer of title; and In an FOB transaction, "delivery" occurs at the time when the goods are on board the vessel at the named port of shipment (i.e. the location where the LNG is passed over the ship's rail). At the point of delivery, the risks transfer from the seller to the buyer.
Again, in an FOB scenario, delivery is tied to the physical delivery / transfer of risk, and not to the transfer of title. Does REMIT distinguish between the physical delivery of LNG into the EU and the transfer of title to the LNG?
A contract for the supply of LNG has the following characteristics:transfer of title between the buyer and the seller happens in international waters; and after the title is transferred to the buyer, the seller delivers on a DES basis to the flange of an EU regasification terminal. Is this contract subject to REMIT?
Does the seller have to register as a market participant / report this transaction?
A contract for the supply of LNG has the following characteristics:the seller delivers the goods on an FOB basis; the named port of shipment is outside of the EU; and transfer of title to the goods happens in the EU. Is this contract subject to REMIT? Does the seller have to register as a market participant / report this transaction?
In the Agency’s view, REMIT does not distinguish between the physical delivery of LNG into the EU and the transfer of title to the LNG.
We believe that market participants know where the delivery takes place and they should be able to derive their own conclusions. In addition, whenever market participants (MP) may have any doubts about the delivery point, we would recommend (MP A) to report the transaction in any case, even if the other counterparty (MP B) would not agree with (MP A).
In this case (MP A) would not take the risk of not reporting a reportable contract according to REMIT. The EIC for the destination delivery point can be reported in this case.
We also recommend market participants to read Questions 3.1.21, 3.1.22, 3.1.23 and 3.1.24 of the FAQs on transaction reporting document which, in the Agency’s view, would help to understand the scope of LNG contracts under REMIT.