Gas pipeline projects: Several roadblocks along the way

Issues such as land acquisition, investigations hindering implementation

ISLAMABAD:

Gas pipeline projects worth over $1 billion appear to have hit a snag following land acquisition issues and investigation by anti-corruption watchdogs.

Gas utilities - Sui Northern Gas Pipeline Limited (SNGPL) and Sui Southern Gas Company (SSGC) - are currently working on different pipeline projects that extend up to 538 kilometres.

The Economic Coordination Committee (ECC) has also approved Rs101 billion as loans from commercial banks which would be recovered from gas consumers.

Petroleum minister Shahid Khaqan Abbasi had informed the premier in a high level meeting, held in October, that SNGPL was executing the 200-kilometre gas pipeline project, while SSGC was working on the 338-kilometre one that has a capacity of 1.2 billion cubic feet per day (bcfd).

He said the Rs101 billion financing had already been approved by the ECC. The minister assured that both projects would be completed by December 2016.

However, when it came to implementation, he said the project being executed by SNGPL was facing issues in Punjab due to non-availability of land acquisition collectors in 12 districts. The project being executed by SSGC is also facing issues as the utility is surrounded by clouds of investigations being conducted by the National Accountability Bureau (NAB), Federal Investigation Agency (FIA) and Rangers, he added.

Financing woes

So far, the government has collected Rs84 billion in GIDC in an attempt to finance the laying of gas pipelines, but it has refused to give the money to the utilities and has instead asked them to borrow Rs101 billion from commercial banks.

That, as a result, would put additional burden on the consumers, which will lead to a massive rise in gas prices.

When the matter was taken up with the Ministry of Finance, it pushed the utilities to seek bank loans and assured them of government’s guarantee in their favour.

Now the consumers, who had already paid Rs84 billion, will be forced to contribute another Rs101 billion to help gas companies repay loans along with their mark-up.

Apart from this, the Oil and Gas Regulatory Authority has given approval to an 18% rate of return on assets to gas utilities, which will also prod the consumers to pay an extra Rs36 billion. The ECC took the decision on borrowing funds from commercial banks in its meeting held on September 3.

Meanwhile, the petroleum ministry told the meeting that it was aggressively making efforts for the import of Liquefied Natural Gas (LNG) to meet the shortfall as a short-term measure.

Work on many projects for the import of 1,200 million cubic feet of LNG per day is being undertaken, but existing pipelines have the capacity to handle only up to 400 mmcfd. Of this volume, 280 mmcfd could be shipped to the SNGPL system and 120 mmcfd could be consumed in the SSGC network.

Both companies have embarked on infrastructure development projects for handling LNG and anticipated higher domestic gas supplies. These are expected to be completed by December 2016 in two phases depending on the availability of funds. SNGPL and SSGC have already arranged funds from commercial banks for the first phase and are seeking Rs58 billion and Rs40 billion respectively, for the second phase.

Published in The Express Tribune, December 4^th, 2015.

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