Affordable power: LNG imports a risk to energy security says OGRA

Regulator for utilising coal, proposes committee for considering LNG projects.

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) has come up with a proposal which recommends the shift from liquefied natural gas (LNG) to coal for producing cheaper electricity because of a wide difference between costs of power generation.

In a letter sent to the Cabinet Division, Ogra said “it is desirable to consider the option of using coal for power generation in order to have energy security at competitive and affordable prices.” It also pointed to new demands made by an LNG project developer which would “hurt gas-import economics”.

A senior Ogra official told The Express Tribune that the project developer sought government guarantee against LNG import, though the LNG Policy 2011 did not have any such provision. He said the LNG importer also extended the gas delivery date to November 2012 from the middle of the year earlier and asked the government to nominate gas buyers.

“Keeping in view such a situation, Ogra has proposed to put the matter before the Economic Coordination Committee (ECC),” he said, adding international competitive bids should be invited to encourage more parties.

In its letter, Ogra suggested that a high-level committee should be constituted comprising representatives of the Finance and Cabinet Divisions, ministries of finance, petroleum, water and power, Ogra, Nepra, Planning Commission and gas utilities which could formulate recommendations for the ECC for clearance of LNG import projects.

Ogra has already allocated pipeline capacity for up to 1.4 billion cubic feet of imported LNG per day to three project developers. Global Energy Pakistan has been allocated capacity of 500 million cubic feet per day (mmcfd), Pakistan Gas Port has been allocated capacity of 400 mmcfd and Engro has got capacity of 500 mmcfd.

Ogra pointed out in the letter that the price of LNG could be above $18 per million British thermal unit (mmbtu), which was four times costlier than locally produced gas.

The regulator proposed switching from LNG to local and imported coal for power generation because of a huge difference between costs. An LNG-based plant will produce power at a cost ranging from 13.66 to 22.77 cents per unit while a local coal-powered plant will cost an estimated 3.23 cents per unit and imported coal-based plant will cost 5.96 cents per unit.

According to Ogra estimates, the cost of power produced by LNG for open power plants will be 22.77 cents per unit and for combined-cycle  power plants it will be 13.66 cents per unit. The power produced through natural gas will cost between 3.43 cents and 5.71 cents per unit, liquefied petroleum gas (LPG) based power will cost 17.78 to 29.63 cents per unit, furnace oil-run plants will cost 15.18 to 25.31 cents per unit and diesel-run plants will cost 20.55 to 34.26 cents per unit.

According to the cost comparison, Ogra said power generation through LNG would be very expensive and prove detrimental to the people. It also called for offering incentives to gas producers to encourage them to enhance production.

Published in The Express Tribune, December 14^th, 2011.