You are on page 1of 5

LIMITED

Energy Related Services (ERS) Annex Proposal: Questions and Answers
1.
This document is meant to address a number of questions raised orally and in writing
during the presentation of Iceland and Norway's proposal at the December 2014 TiSA round.

General Comments
Rationale for Energy Related Services Proposal
2.
The Energy sector is an important and growing market in the global economy. Energy
related services are no less important and constitute an integral part of the energy production
chain. WTO members and services agreements have struggled to capture this important
market in a clear and meaningful way, both for services suppliers and consumers. The fact is
that commitments in this field are limited. There are a number of reasons for this, including:
Classification: ERS were never defined as a specific sector or sub-sector in the W120.
Scope: ERS are very diverse and cover a lot of other sectors/sub-sectors
Sensitivity: Energy is sensitive and related to issues of security/sovereignty.
3.
In order to address some the shortcomings/issues, the approach taken in the proposal is
meant to distinguish between energy related services - as we define it - from the more
sensitive energy sector as such. This we believe will allow us both to define the services we
are aiming at, subject these services to certain disciplines and allow parties to make more
ambitious commitments.

Main objective of the proposal:
4.
The proposal seeks to highlight, define and capture this important services market in a
modern TiSA agreement. The International Energy Agency projects (see figure below) that
the global use of energy will increase by 37% from 2012 to 2014. This implies that the need
for services in relations to exploration for and production of energy in the coming years will
also increase, thus underlining the importance of parties making commitments on energy
related services.
5.
In so doing we want to avoid the most challenging and sensitive issues - including the
classification issue - and to create a definition/scope for energy related services that is
understandable, functional and reflects market reality.
6.
There is a close inter-relationship between sets of activities provided by suppliers of
energy related services. The absence of commitments in an offer regarding some of these
services undermines the value of commitments with regard to other energy related services.
7.
One of the key features of the proposal is that it seeks to raise the overall level of
ambition across offers in this sector, through the use of binding market access scheduling
disciplines. This approach also ensures that any future TiSA parties are held to the same
standard as current parties.

1

LIMITED
Offensive Interest:
8.
Iceland and Norway have companies that specialize in servicing energy companies for
both renewable energy and fossil energy sources. The proposal is meant to encompass all
services related to the exploration for and production of energy from renewable or nonrenewable energy sources, as well as all delivery forms such as fuels, heat, and electrical
energy. Specific rules in the energy related services sector should therefore establish that
commitments are neutral with respect to the energy source, technology and whether offered
onshore or offshore.

Example of typical ERS supplier in Iceland:
9.
For Iceland the main interest is in the renewable energy sector, in particular
geothermal and hydro. Iceland has a handful of small firms that offer comprehensive services
for energy projects through all phases of development, based on the decades of experience
harnessing renewable energy in Iceland. This includes mainly consultant type services as
contractors or sub-contractors to energy companies in a number of areas and CPC categories ranging from business services (engineering, architecture, technical testing and analysis) to
plant design, construction, (site formation and clearing services, including scientific drilling)
geoscience, information technology and environmental impact assessments.
Example of Energy Related Services supplier in Norway:
10.
Norway has extensive industries both in oil and gas and renewable energy (hydro,
wind). Norwegian companies supply services in the whole value chain in this respect such as
engineering, architecture, technical testing and analysis (seismic), plant design, platform
design, constructions, exploration and productions drilling and impact assessments.
Article on scope and definition
11.
The scope and definitions articles are designed in a manner that avoids the
classification issue. Instead, we are proposing a functional description of ERS that reflects
what is actually happening in the market place - since this market is more or less defined by
the consumers of these services: the energy companies.
12.
It also ensures that sensitive issues related to ownership, resource management and
regulatory space are outside the scope of the proposal. The intent is to capture, in a
meaningful and understandable way, the growing market of specialised services supplied by
contractors and subcontractors to the energy companies themselves.
13.
While the approach might be novel for a services agreement, it is not without its
challenges. The main concern we hear from TiSA negotiating parties is that the scope is too
broad: some parties would prefer an illustrative list of CPC categories to better define the
sectors that are most relevant to ERS. To address this concern, and working within the CPC
Prov. classification, we have tried to incorporate them in the new market access provisions
(see below).

Questions:
Q 1: Could we include other provisions in the scope of ERS such as transmission and energy
efficiency services?
2

LIMITED
A: Yes, the idea is to capture all relevant/primary facets of the energy sector noting that ERS
are incidental services supplied to energy companies in all phases – from exploration to
transmission and distribution.
Q 2: Are all possible energy related services covered? Does that include nuclear?
A: Yes, all ERS as defines in the scope/definitions are covered by the proposal, including
nuclear. The scope regarding the market access provisions is, however, limited to the CPC
sectors listed thereunder. Regarding nuclear energy, we understand the particular sensitivities
around this energy source, but believe they are adequately addressed both by the scope of the
proposal itself as well as the security exemption in the core text.

Articles on market access
14.
Articles 3.1 and 4.1 are meant to ensure that parties take full commitments for modes
1, 2 and 3 respectively, without limitations of any kind for energy related services that fall
within the sectors and sub-sectors listed thereunder. This standard applies to market access
and national treatment, and would preclude parties from taking policy space reservations that
would apply to ERS for the listed CPC categories.
15.
Articles 3.2 and 4.2 are meant to ensure that parties take commitments for modes 1, 2
and 3 respectively, partially or with limitations, conditions or restrictions, for energy related
services withing the sectors and sub-sectors listed.
16.
The lists of CPC categories and sub-categories and the distribution of CPC categories
between paras 1 and 2 of the two articles, are based on a detailed analysis of parties' offers.
The two articles are meant to reflect the reality of achieving a doable common standard for
TiSA participants in this area.
17.
Iceland and Norway are fully cognizant of the general discussion related to CRPs and
the challenges raised by certain delegations regarding hard market access standards. We are
looking at possible solutions, including a model schedule that parties could use in order to
retain the overall value added of a dedicated ERS annex and good market access
commitments.

Questions:
Q 3: Where is the scheduling flexibility for those that need it? How to schedule partial
commitments? How to distinguish horizontal limitations in specific sectors? What about
horizontal policy space reservations?
A: Our aim is to create an ambitious market access standard for this important services sector
based on a realistic assessment of offers and the current levels of market openness. There is
intentionally no flexibility in the CRP articles as an analysis of the initial offers reveals that
the majority of TiSA members already comply with these obligations. We are ready to look at
offers id the analysis is deemed incomplete. There is, on the other hand, flexibility in articles
3.2 and 4.2. Further discussion will show whether more nuanced approached are needed to
maintain realism.
Horizontal limitations and policy space reservations may apply, but sectoral limitations and
reservations applicable to one or more of the sectors and sub-sectors listed, are not necessarily
3

LIMITED
applicable to the energy related services that belong under a given category. To what extent
they do, will be guided by the further refinement of the offers and market access analysis.
Q 4: Do the articles cover both market access and national treatment?
A: Articles 3.1 and 4.1 cover both market access and national treatment, while articles 3.2 and
4.2 do not add value with respect to national treatment beyond what may be derived directly
from the core provisions.
Q5: Is wording with respect to which disciplines are covered precise/clear enough, i.e.
that is covers both market access and national treatment/ Part A or Part B of the schedule?
A: We might amend the wording to ensure more clarity.
Q 6: Could we include other relevant CPC categories such as pipeline transport or energy
distribution?
A: We would be open to include other ERS relevant categories to give a 'complete' picture, or
a complete list of all such categories.

General questions on market access:
Q 7: Would there be appetite to include MA provisions for mode 4?
A: We are open to any suggestions to strengthen commitments/ambitions, including in mode
4, which is both relevant and important for the supply of ERS. In this respect we could look at
different approaches being adopted in other proposals, including Canada's approach on mode
4 in the environmental services proposal.
Q 8: DO the MA provisions overlap with other proposals?
A: There is an overlap with certain proposals but no conflict. On the one hand we are trying to
capture a very broad 'sector'. On the other hand we are trying to capture very specifically
defined services within individual CPC categories and sub-categories. However, when it
comes to consistency on how we approach different methods to capture market access
obligations (CRPs) in annexes, we would be open to exploring a common approach.
Q 9: Legal overlap?
A: This proposal would supersede the scheduling provisions of the core text for the purposes
of parties' scheduled commitments for ERS.
Q 10: Local content requirements that disturb trade flows exist in several markets. Is this a
challenge that may be addressed separately in the ERS annex?
A: The issue of local context is complex. If the participants are interested in addressing this
issue in the annex it should be possible to introduce provisions to that effect. Likewise, if
participants wish to address other issues that will add value to the annex this may also be
discussed.

Articles on sovereignty and right to regulate
18.
This provisions makes explicit that each Party has full sovereignty and sovereign rights
with respect to the ownership of natural resources, including energy resources. Commitments
on trade in energy related services do not interfere with these sovereign rights. We have seen
numerous examples in party offers of a horizontal carve-out of all energy services,
presumably based on the sensitivities described above.
4

LIMITED

19.
The right of Parties to regulate services and to introduce new regulations to meet
national policy objectives is particularly pertinent in the field of energy related services. In
exercising this right, Parties have to make sure that the regulatory measures on aspects not
covered by market access and national treatment are clearly defined, transparent and
objective.

Questions:
Q 11: Where does this text come from?
A: Language is inspired from the Energy Charter Treaty, art 18.1, 2 and 3.
Q 12: Is it necessary to have such articles? What is the purpose/value added?
A: The main purpose of this Article is to state explicitly that commitments with regard to
energy related services will in no way limit the sovereignty or sovereign rights of Parties over
energy resources. We have tried to exemplify this in Article VI para. 3 of the Proposal, by
stating that each Party continues to hold the exclusive right to:




decide the geographical areas to be made available for exploration, development and
exploitation of its energy resources;
decide the optimisation of the rate at which their energy resources be depleted or
otherwise exploited;
specify and enjoy any taxes, royalties or other financial payments payable by virtue of
such exploration and exploitation;
regulate the environmental and safety aspects of such exploration, development and
exploitation;
participate in such exploration and exploitation, inter alia, through direct participation
by the government or through state enterprises.

Q 13: Would a right to regulate article be redundant if included in the core text/preamble?
A: No

Articles on competition and government procurement
20.
This provision sets out some common standards such as transparency, objectivity, and
independent regulator and requirements that prevent anti-competitive practices for energy
related services. In some WTO Members the energy services market is dominated by one or
very few entities with exclusive rights to natural resources. The dominant position warrants
some sort of disciplining, addressing issues normally regulated in competition rules.

5