Laying new pipeline: ECC likely to allow gas utilities to borrow Rs175b

Pipeline from Karachi to Lahore will carry 1.2 bcfd of imported LNG to consumers in Punjab

ISLAMABAD: The Economic Coordination Committee (ECC) is likely to allow public gas utilities to borrow Rs175 billion from commercial banks for laying a new pipeline from Karachi to Lahore that will transmit 1.2 billion cubic feet of imported gas per day (bcfd), a senior government official said.

These utilities are already working on a pipeline augmentation project in a bid to enhance the capacity of their network to carry 1.2 bcfd of imported liquefied natural gas (LNG) for energy-starved consumers.



One LNG terminal has been working in Pakistan since March 2015 and two more terminals are being built by different companies.

The second LNG terminal is being built by Pakistan Gasport for handling and transporting 600 million cubic feet of gas per day (mmcfd) to three LNG-based power plants in Punjab that will have a cumulative production capacity of 3,600 megawatts. The terminal will start operations this year.

According to the official, the Ministry of Petroleum and Natural Resources is seeking allocation of Rs175 billion for the gas utilities from the collection of Gas Infrastructure Development Cess (GIDC) for laying the Karachi-Lahore pipeline for LNG transmission.

The government has so far collected around Rs183 billion in GIDC, but the revenue has been spent on bridging the deficit and on different projects like infrastructure.

The Pakistan Peoples Party (PPP) government, during its tenure from 2008 to early 2013, had imposed the GIDC in an effort to fund the pipeline projects.

As the collected revenue has been exhausted, the gas companies are compelled to make commercial borrowing for the new pipeline. They have already borrowed Rs101 billion from commercial banks for pipeline augmentation with guarantees from the Ministry of Finance.

SNGPL, which meets energy requirements of Punjab and Khyber-Pakhtunkhwa, has completed its first pipeline augmentation project for a smooth gas transmission from Karachi to Lahore.

The Ministry of Petroleum has sent a summary to the ECC, seeking approval for acquiring bank financing or fund allocation from the GIDC collection for building the new pipeline.

Punjab has a very thin share in gas production, which forces SNGPL to provide energy to domestic consumers only in the winter season, when demand shoots up.

Owing to the gas scarcity, industrial units in the province including textile mills and compressed natural gas (CNG) filling stations have switched to imported LNG.

With this, the Rs450-billion CNG industry, which remained closed most of the time in winter due to the absence of natural gas supplies, has resumed its business.

“The LNG pipelines being laid by SNGPL will take imported gas to Punjab for the revival of industries that have no domestic gas available due to natural gas shortage in the country,” an official said.

Last year, SNGPL turned into a profit-making company after curbing its transmission and distribution losses.

“Its unaccounted-for-gas (UFG) loss was 10.98% in 2014-15, which came down to 9.21% in the following year. With the ongoing pipeline augmentation projects, the company’s assets will rise further,” the official said.



Now, the UFG loss, caused by gas theft and leakage, has dropped further. A 1% reduction in the UFG level means injection of Rs2 billion into profits.

According to the official, Ogra allows the recovery of 4.5% UFG loss from gas consumers whereas the remaining is borne by the company. The fall in UFG loss will provide the company an opportunity to stave off a major hit to its balance sheet.

Published in The Express Tribune, June 15^th, 2017.

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