Carving the (LNG) pie: PPL, PSO and OGDC to acquire shares in LNG terminal

Three companies will invest $15m each in the $150m project.


Zafar Bhutta December 11, 2012

ISLAMABAD:


Three state-owned oil and gas companies – Pakistan Petroleum Limited (PPL), Pakistan State Oil (PSO) and Oil and Gas Development Company (OGDC) – will acquire shares in a planned liquefied natural gas (LNG) terminal in an attempt to give a fresh impetus to efforts to fast-track import of LNG.


“Following comprehensive discussions, the petroleum ministry has decided that Sui Southern Gas Company’s LPG Company, PSO, OGDC and PPL will inject equity of $15 million each into the LNG project,” an SSGC official told The Express Tribune.

On its part, “the federal government will provide $10 million through the gas infrastructure development cess (GIDC) being collected from consumers in their utility bills.”

For the import of LNG, the gas handling terminal will be built at a liquefied petroleum gas (LPG) terminal, owned by gas distributor SSGC, at an estimated cost of $150 million, the official said.

A tender has also been floated to pick an engineering, procurement and construction contractor. At least, $45 million needs to be raised for the project on the basis of 70:30 debt-equity ratio.

$10m

The Economic Coordination Committee (ECC), in its meeting held on October 3, had approved swift import of LNG through a special purpose vehicle (SPV) – a subsidiary company to finance a project – of SSGC and Sui Northern Gas Pipelines Limited (SNGPL).

It also permitted the federal government to acquire shares in SPV by investing the money collected under the head of GIDC.

The SSGC official revealed that sovereign guarantees, backed by banks, would be provided to shield LNG import. This imported gas will be supplied mainly to power companies after opening of letters of credit to avoid the risk of circular debt.

The government-backed LNG import plan came after private LNG importers failed to bring gas to meet acute shortage of the fuel in the country. International LNG suppliers were also not willing to supply gas in absence of government guarantees. The rising circular debt was another hurdle in the way of LNG import.

“Owing to these reasons, the government decided to shun the private sector and go for import itself by providing guarantees. Under this programme, one billion cubic feet per day will be imported, of which 200 million cubic feet will be brought on a fast-track basis,” the official said.

According to officials of the petroleum ministry, PPL, PSO and OGDC have been invited to acquire equity shares in the special purpose vehicle. This will not only ensure swift import of LNG and LPG, but will also help PPL and OGDC to diversify their operations and market LPG through the special purpose vehicle. Similarly, PSO will be able to sell imported LPG at its auto filling stations.

Published in The Express Tribune, December 12th, 2012.

COMMENTS (1)

shami | 11 years ago | Reply

GOP/MP&NR continues to create uncertainty. RFP for integrated terminal has been issued on Dec 8 and this terminal RFP is due next week. SSGC needs to clarify its objectives and plans and not have private sector pursue a scheme that has implementation issues. ECC approved fast track of 200 mmscfd at existing infrastructure and in case SSGCL infrastructure could not be retrofit to handle the 200 mmsfd. It did not approve new LNG terminal in public sector of 500 mmscfd and by SSGCLPG It also required active participation of private sector and all processes to follow PEPRA rules

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