Section 110: Domestic Gas Delivery Obligations.

1 Subject to subsections (2) and (4), the Commission shall, by a regulation or guideline made under this Act—
a prescribe and allocate the domestic gas delivery obligation among all lessees before 1st March of each year based on the domestic gas demand requirements determined or updated under section 173 of this Act; and
b ensure compliance by every lessee of the domestic gas delivery obligation.

2 A lessee may, on a voluntary basis, conclude contracts with wholesale customers of the strategic sectors or with wholesale gas suppliers supplying the strategic sectors for delivery of marketable natural gas on a free market basis to these customers or suppliers and notify the Commission of the contracts and where the volume of the contracts is equal to or higher than the domestic gas delivery obligation for the lessee, the lessee shall—
a be deemed to have fulfilled its domestic gas delivery obligation;
b not be a producer client of the gas aggregator; and
c inform the gas aggregator.

3 A lessee who has complied with its domestic gas delivery obligation or may wish to supply wholesale customers who are not part of the strategic sectors may deliver further supplies of marketable natural gas to the domestic market on a willing seller and willing buyer basis.

4 A wholesale gas supplier may, on a voluntary basis and following the procedure stipulated under subsection (2)—
a enter into a contract with a lessee or wholesale customer of the strategic sectors for the delivery of marketable natural gas to the customers; and
b inform the Commission and Authority of the contracts.

5 The Commission shall require a lessee producing natural gas to carry out works and operations which may be required to increase production and to dedicate specific volume of the natural gas produced towards the requirements of the domestic market.

6 The volume of natural gas to be dedicated by a lessee towards the domestic gas delivery obligation shall be based on an allocation system among lessees as determined by the Commission upon consultation with the Authority with consideration of supporting infrastructure availability.

7 A lessee shall be obliged to deliver the volume of natural gas prescribed under subsection (6) to a wholesale customer determined by the domestic gas aggregator and at a location indicated by the domestic gas aggregator under section 156 of this Act.

8 Subject to the provisions of subsection (7), a lessee who fails to comply with the domestic gas delivery obligation shall incur a penalty of US $3.50 per MMBtu not delivered, provided that, where the lessee has signed a gas purchase and sale agreement with a wholesale supplier of the strategic sectors, the penalty for failure to deliver shall be as stated in that agreement.

9 The penalty amount of US $3.50 per MMBtu referred to under subsection (8) may be adjusted as the Commission may prescribe in a regulation made under this Act.

10 A lessee shall not incur a penalty prescribed under subsection (8), where it can establish that its failure to comply is as a result of—
a force majeure;
b the inability of a purchaser to accept allocated natural gas volumes;
c the inability to transport the allocated natural gas for reasons beyond the control of the lessee; or
d the failure of a purchaser to pay for allocated natural gas volumes.

11 The Commission shall discontinue the imposition of domestic gas delivery obligations, where the Authority has determined under section 167 (3) of this Act that the natural gas market has attained full market status.

12 Upon being allocated the volumes to be supplied under the domestic gas supply obligation under subsection (1), the lessee shall submit a marketable natural gas production and supply plan consistent with these obligations to the Authority.

13 A producer-customer of the domestic gas aggregator shall pay compensation to customer-client for any loss suffered as a result of default to supply marketable natural gas in accordance with a gas purchase order issued by the domestic gas aggregator.

14 A lessee who does not comply with the domestic gas delivery obligation as directed by the Commission shall—
a in addition to the penalties provided under subsection (8), not be entitled to supply natural gas to any new midstream gas export operations, provided that this provision shall not apply to gas sales agreements already entered into; and
b where the lessee is supplying natural gas to midstream gas export operations, the Commission may impose other sanctions as are prescribed in a regulation made under this Act.

15 An approval for the supply of natural gas for export projects shall, from the effective date, be subject to prior compliance by the lessee with its domestic gas delivery obligation.

16 Domestic gas delivery contracts entered into by lessees or licensees prior to the effective date and continuing after the effective date, shall be counted towards their domestic gas delivery obligation under this section.