OGRA refuses to set LNG price without ECC’s approval

PSO requests determination of price for six cargoes imported from Qatar

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) has refused to set the price of liquefied natural gas (LNG) imported from Qatar on a spot purchase basis, pushing the Ministry of Petroleum and Natural Resources to knock on the doors of the Economic Coordination Committee (ECC) for approval.

The price determination was sought for six LNG cargoes purchased by Pakistan State Oil (PSO) from Qatargas-2.



“PSO had taken up the matter of LNG price determination with Ogra, but it did not entertain the request without approval of the competent authority (the ECC),” the petroleum ministry said in a summary sent to the ECC.

These cargoes were bought from Qatar in a government-to-government supply arrangement, the ministry said.

PSO had entered into a Master Sale and Purchase Agreement with Qatargas and signed a confirmation notice for one cargo on March 19, 2015, which would be purchased and supplied to Pakarab Fertilizers on a free-on-board basis.

In the first week of April 2015, Qatargas said according to a report of its security assessment team, Port Qasim was not ready to receive Q-Flex, an LNG carrier, though the cargo was expected to be fully re-gasified by mid-April and the terminal was entitled to receive a daily capacity charge.

Various alternative options both in terms of tenders and government-to-government arrangements were examined by a consultant. Potential options were limited given the time constraints as five more LNG cargoes were purchased from Qatargas on free-on-board basis.

After the bidding process, Sui Southern Gas Company and Elengy Terminal Pakistan Limited, the operator of LNG terminal at Port Qasim, had executed an LNG services agreement on April 30, 2014 for receiving LNG, its storage and re-gasification at a tolling fee of $0.66 per million British thermal units (mmbtu).

Under the agreement, capacity charges were set at $272,479 per day for the first year and $228,016 per day for the second year while utilisation charges were fixed at $0.06273 per mmbtu.

Based on the numbers, the tariff stands at $1.42 per mmbtu for the first year for handling 200 million cubic feet of LNG per day, which will fall to $0.63 from the second year because LNG supplies will increase to 400 mmcfd.

The terminal, constructed in a record time of less than 11 months, started functioning on March 27 last year and has handled 18 LNG cargoes so far.

PSO imported these 18 cargoes from Qatar in order to avoid capacity charges. Of these, six were purchased from Qatargas-2 in a government-to-government contract.

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The ECC had allowed PSO that it being a commercial enterprise could import LNG on either free-on-board or cost-and-freight basis. It, however, directed that the company must keep in view commercial prudence and relevant rules and regulations while making LNG imports.

Published in The Express Tribune, January 31^st, 2016.

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