Company set up by CNG sector allowed LNG import

Govt grants licence to Universal Gas Distribution Co that will ink deal with gas utilities

ISLAMABAD:

The government has allowed Universal Gas Distribution Company (UGDC), a private firm associated with the body of compressed natural gas (CNG) station operators, to import and purchase liquefied natural gas (LNG) for onward sale to consumers in any part of the country.



“The government has issued a licence to UGDC for the import and sale of LNG after completing the legal process that took 19 months,” said an official while talking to The Express Tribune.

Before giving the permission, the Oil and Gas Regulatory Authority examined the legal framework, held public hearings and conducted a third-party audit. Now, UGDC can import or buy LNG from any government or private enterprise for its sale to consumers.



Already, a pipeline capacity for 75 million cubic feet of LNG per day (mmcfd) has been allocated to UGDC and the Ministry of Petroleum and Natural Resources has written a letter to gas utilities asking them to sign a commercial agreement with the company. However, if needed, the government could utilise this pipeline capacity for running power plants.

“Now, the legal requirement of a marketing licence has been met and the commercial agreement is likely to be signed between UGDC and gas utilities very soon,” said the official, who was aware of the developments. In a statement, UGDC Chairman Brigadier (Retired) Iftikhar Ahmed and CEO Ghiyas Paracha said the government’s decision was the first if its kind that would promote investment, improve confidence of investors and help tackle energy crisis.



“This is a first-ever attempt by a sinking industry to bail itself out and it will become a case study in business schools around the world,” they said, adding credit went to Prime Minister Nawaz Sharif and Petroleum Minister Shahid Khaqan Abbasi for making efforts to rescue the Rs450-billion CNG industry, which was collapsing financially due to gas shortage, especially in Punjab.

The industry claims it provides jobs directly for about 300,000 skilled and unskilled workers and indirectly for 150,000 people.

Thousands of closed CNG stations in Punjab would be preferred for uninterrupted gas supply through the network of Sui companies according to existing rules and regulations and it would also lead to creation of jobs, they said. The CNG will be 30% cheaper compared to petrol.

Earlier, the Economic Coordination Committee (ECC) approved a transaction model in March 2015 for LNG import by the CNG industry through a special purpose vehicle under arrangements with private players for the re-gasification of LNG. The government has already permitted CNG station operators that they could directly import LNG without involving Pakistan State Oil in line with the ECC’s decision.

In this regard, the Ministry of Petroleum also wrote a letter to UGDC, which was set up by the CNG industry for LNG import and its conversion into CNG for consumption by motorists in Punjab.

According to an assessment of the ministry, the consumption of LNG in CNG stations will lead to savings of around $1.4 billion per annum in oil imports as well as domestic natural gas production.



It is of the view that replacement of petrol by environmentally friendly LNG will help improve carbon footprints of Pakistan by almost six million tons of greenhouse gas emissions per annum, which will offset the emissions from upcoming coal-based power projects.

Published in The Express Tribune, February 25^th,  2016.

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