The government has allowed compressed natural gas (CNG) station operators that they could directly import liquefied natural gas (LNG) without involving Pakistan State Oil in line with a decision of the Economic Coordination Committee (ECC).
In this regard, the Ministry of Petroleum and Natural Resources has written a letter to Universal Gas Distribution Company (UGDC), which has been set up by the CNG industry for the import of LNG and its consumption by motorists in Punjab, an official says.
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Earlier, the ECC had approved a transaction model in March this year for LNG import by the CNG industry through a special purpose vehicle under arrangements with private players for re-gasification.
The petroleum ministry has asked Sui Northern Gas Pipelines Limited (SNGPL) to sign a supply agreement with UGDC for providing gas to the CNG stations. For this purpose, the Third Party Access Rules have been suspended.
This comes after UGDC approached the ministry seeking allocation of pipeline capacity for transporting 75 million cubic feet of LNG per day by using the transmission network of SNGPL.
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“However, the government could use this pipeline capacity if it needs LNG for running power plants,” the official said, noting the government would make savings on account of capacity charges to the LNG terminal operator because of enhanced supply of LNG after imports by the CNG industry.
At present, the government is paying $1.4 per million British thermal units (mmbtu) in tolling fee against a levelised tariff - spread over 15-year lifetime of the import contract - of 0.66 cent per mmbtu.
According to an assessment of the Ministry of Petroleum and Natural Resources, 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.
The permission for direct LNG import is expected to save the CNG industry from collapse as locally produced natural gas supply is cut off frequently in the face of shortages. The industry says it has invested Rs450 billion in its business and provides jobs directly for about 300,000 skilled and unskilled workers and indirectly for 150,000 people.
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Approximately 3.7 million vehicles, equipped with CNG conversion kits, rely on gas in place of petrol across the country.
According to a plan, the CNG station operators will keep a 30% difference between prices of petrol and CNG - the latter will be cheaper, which is used in passenger vehicles and goods carriers.
The ministry is also of the view that the replacement of petrol by environmentally friendly LNG will help improve carbon footprint of the country 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, December 3rd, 2015.
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