ISLAMABAD: Engro Corporation and Sui Southern Gas Company (SSGC) on Monday signed a deal to utilise idle capacity of the first liquefied natural gas (LNG) terminal.
The two companies inked an amended LNG Services Agreement for enhanced capacity of 200 million cubic feet per day (mmcfd) of the LNG terminal built by Engro more than two years ago.
The terminal called Elengy Terminal Pakistan Limited (ETPL) was earlier given a contract to process 400 mmcfd of LNG through a tender. However, now without going into the bidding process, the government has allocated another 200 mmcfd to the terminal.
Already, the terminal was using the idle capacity of 200 mmcfd without any services agreement and now the amended deal has been signed.
A senior government official told The Express Tribune that Public Procurement Regulatory Authority (PPRA) rules allowed the state-run gas utility SSGC to use an additional capacity of 15% or 60 mmcfd through the bidding process.
However, SSGC and Engro entered into the deal without following the set competition rules.
When approached, an SSGC spokesperson emphasised that the deal was negotiated according to the PPRA rules.
On behalf of the government, Pakistan State Oil (PSO) has been importing 300 mmcfd of LNG from Qatar and 100 mmcfd through global commodity trader Gunvor. PSO had signed an LNG deal with Qatar at 13.37% of Brent crude oil price.
However, Pakistan LNG Limited has secured a price of 11.64% of Brent crude oil rate in a later tender awarded to Gunvor and Eni for short and long-term supplies.
According to sources, the Engro terminal has been asking the government to allow it to utilise the remaining 200mmcfd capacity, but the request was turned down, which led to higher terminal charges at $1.45 per million British thermal units that were passed on to consumers.
ETPL has the unutilised capacity since the start of operations in March 2015, which has put an extra burden on the gas consumers.
The government decided to put the unutilised capacity to use and SSGC had been under pressure to cooperate. The decision was taken in a high-level meeting on May 17, 2016.
Published in The Express Tribune, December 12th, 2017.