What Pipeline Law Governs and Whom It Concerns
Pipeline law is one of the most capital intensive and regulatorily complex parts of the oil and gas sector. Georgian legislation regulates two principal matters in this field: the transportation of extracted oil and gas and the licensing of transportation activity. On this page we explain the relevant norms of the Law on Oil and Gas — specifically its Articles 21 and 25-2 — and clarify what opportunities investors and license holders have regarding the construction and use of pipelines and access to pipeline capacities. This material is useful both for companies operating in the sector and for carriers seeking access to pipeline capacities. The page is focused on the questions that arise most often in practice: what rights investors have, how licensing works, and when other carriers may demand the use of the network.
Transportation of Extracted Oil and Gas
Under Article 21 of the Law, the construction, operation and use of non mainline pipelines and buildings connected with oil and gas operations are carried out in accordance with Georgian legislation and the contract. This means that the terms of a specific project obey both the general legal framework and the contract concluded between the investor and the state — and the consistency of both layers is a precondition for the continuation of the project.
The same article grants the investor two important rights. The first is the right to conduct negotiations on the commercial use of the free capacities of main pipelines owned by the state. The second is the right, taking into account the requirements of Georgian legislation, to build and use an oil and gas main pipeline for connection to an existing main pipeline for the purpose of exporting its share of oil and gas defined by the contract. The practical exercise of these rights requires a precise study of the contractual terms and the legislation: it matters that a pipeline built for export serves the share defined by the contract and that its connection to the existing mainline network does not contradict the requirements of the legislation. In our experience, it is at this stage that most legal questions arise, since the terms of the contract and of the licensing regime often need to be reconciled with each other.
The Transportation Licence and Access to Capacities
Article 25-2 of the Law regulates specialized transportation. The holder of a general licence for the use of oil and gas resources, its affiliated company or another person has the right to submit an application to the agency for a transportation activity licence — solely for the purpose of transporting the raw material produced by it or its oil and gas products. This establishes the rule under which licensing is tied to one's own production rather than to any transport activity whatsoever.
Particularly important is the rule on access to capacities: in accordance with the normative acts of the agency, the licence holder must make the excess, unused capacity of the pipeline available to other carriers on a non discriminatory basis if, first, taking into account justifiable operational factors, which include only the potential for expansion of demand and production, the full capacity of the pipeline is not regularly used for transporting the licence holder's own raw material or oil and gas products; and second, the licence holder concludes or offers to conclude a contract with a third party that is not its affiliated company.
This norm introduces an element of competition into the market: if the pipeline is partly empty and the holder works with others, it can no longer remain the sole user. For carriers this means that a demand for capacity must rest on these conditions of non discriminatory access, and in the event of refusal — on the corresponding legal steps.
Frequently Asked Questions
Who may apply for a transportation licence?
The holder of a general licence, its affiliated company or another person — solely for the purpose of transporting its own raw material or oil and gas products.
When does excess capacity become available?
When the full capacity is not regularly used for the holder's own products, or when the holder concludes or offers a contract to a third party.
On what basis is access to excess capacity granted?
On a non discriminatory basis, in accordance with the normative acts of the agency.
May an investor connect to the mainline network?
Yes. Taking into account the requirements of the legislation, a connecting main pipeline may be built and used for export purposes.
How We Help on Legal.ge
The Legal.ge team works in the field of energy law: we analyse contractual terms, prepare applications and negotiation documents on access to capacities, and assess the legal risks of a project in terms of consistency with the legislation. Contact us — we will review your project as a whole, update the contractual obligations, structure the licensing and capacity negotiation process, and prepare reliable legal conclusions. Pipeline projects involve major investment, and the soundness of their legal foundation determines the project's cost and risk from the outset.