9Phase points of relevant operation

9  Phase points of relevant operation  (1) Subject to section 10, the phase points of a relevant operation are:  (a) the point where the upstream stage ends and the downstream stage begins; and  (b) any point in the flow of project product through the operation at which there is expected to be a difference in the ratio of project product to total product flowing through the operation before and after the point; and  (c) any point in the flow of project product through the operation at which:  (i) there is a change in the person or persons who have custody of the project product; and  (ii) at least one of the persons who starts or stops having custody of the project product is a participant in the relevant operation who has or had custody of the petroleum product in the person’s capacity as a participant in that operation; and  (iii) the change occurs for the purpose of carrying out one or more of the actions mentioned in section 8 (including for the purpose of returning petroleum product to participants in the operation after one or more such actions are carried out). Note 1: This section divides the relevant operation into phases in such a way that petroleum product is not brought into or taken out of the operation except at the beginning or end of a phase. In obtaining the cost‑plus and netback prices: (a) the various joint costs incurred by participants in the operation are attributed to each phase (see section 42); and (b) the capital costs are annualised (see Division 3 of Part 4); and (c) the costs for the assessment year are apportioned between the project product and other product, using an energy coefficient appropriate for the phase (see section 49). Note 2: If a new phase point emerges that was not identified before the production year, there may need to be a recalculation of the annualised capital costs. Example 1: A relevant GTL operation begins with the recovery of natural gas and liquid petroleum, using the same extraction facilities. Separate pipelines are used to carry off the natural gas and the liquid petroleum, so that only the gas pipeline is part of the operation. The total product flowing through the operation is reduced, as the liquid petroleum is removed. The ratio of project product in relation to total product therefore changes at the beginning of the gas pipeline, and the beginning of the pipeline is therefore a phase point. Example 2: At the sales gas production facility of a relevant GTL operation, natural gas from another source is added to the project natural gas. The point at which the natural gas is added is a phase point. Example 3: Some of the sales gas produced in a relevant GTL operation is transported in a pipeline that is part of the operation, and therefore enters the downstream stage; it is then sold before liquefaction. The ratio of project product to total product changes when the sales gas is sold before liquefaction, as the total product flowing through the operation is reduced. The point of sale is therefore a phase point. Example 4: A relevant GTL operation involves the recovery of natural gas that is processed into sales gas and then liquefied product. Additionally, under a tolling arrangement, natural gas (the shipper’s natural gas) from another operation enters the relevant GTL operation where it is processed into sales gas and then liquefied product (the shipper’s liquefied product). The shipper’s liquefied product then leaves the relevant GTL operation. There is a phase point when the shipper’s natural gas enters the relevant GTL operation, as the ratio of project product to total product flowing through the relevant GTL operation decreases at that time. There is another phase point when the shipper’s liquefied product leaves the relevant GTL operation, as the ratio of project product to total product flowing through the relevant GTL operation increases at that time.  (2) However, paragraphs (1)(b) and (c) do not apply to a relevant GTL operation for which an election has been made under section 54.  (3) The relevant operation is divided into phases by the phase points. Note: In general terms, a phase is a stage of an operation during which the ratio of project product to total product flowing through the operation remains the same (and is expected to remain the same).  (4) The participants in the relevant operation must:  (a) in the financial year before the production year, notify the Commissioner of any phase points of the operation that are apparent to any of the participants at that time; and  (b) notify the Commissioner as soon as practicable of any phase point that becomes apparent at a later time.  (5) However, subsection (4) does not apply to a relevant GTL operation for which an election has been made under section 54.  (6) The participants in the relevant operation must satisfy the Commissioner that they can provide accurate records of the quantities of petroleum product before and after each phase point (for example, by including metering facilities at the phase point or using other reliable estimation techniques).