In absence of LNG, plants may produce expensive electricity

Power Division fails to reveal actual demand for cheaper LNG fuel from power producers

ISLAMABAD: A delay on part of the Power Division to reveal actual demand for liquefied natural gas (LNG) from power producers may be benefiting oil importers and lead to production of expensive electricity that will force consumers to pay a higher tariff.

According to the merit order based on revised petroleum product prices that came into effect on June 12, 2018, major LNG-based power plants are much higher in the priority list as they produce cheap electricity.

An official revealed that the Petroleum Division had repeatedly requested the Power Division to provide details how much LNG was required by power plants for electricity production in July, but the latter had not yet released the data.



“This delay will provide an opportunity to the oil lobby to supply expensive furnace oil to power producers, which will put a burden on the consumers,” he said.

In May, 19.3% of electricity was produced with the help of furnace oil at a tariff of Rs12.47 per unit whereas LNG-based plants produced 23.85% of electricity at a cheaper tariff of Rs9.10 per unit.

With the start of new state-of-the-art LNG plants, the tariff difference is expected to widen further as their tariff is Rs7-8 per unit. Consequently, electricity generation from furnace oil will be 60-80% expensive than LNG-based production, which will cause a severe loss to the national exchequer.

“This is how oil mafia is pocketing billions of rupees from power consumers every month,” the official said, adding the Power Division appeared to be facilitating the oil mafia by not sharing actual LNG demand from power plants.



The government was committed to import 600 million cubic feet of LNG per day (mmcfd) through the second LNG terminal at Port Qasim, but now it is feared that it will be able to purchase less than half of the desired volume.

First LNG terminal, also built at Port Qasim, is already receiving 600 mmcfd of LNG.

Instead of disclosing firm LNG requirement of power plants, the Power Division was floating the demand for furnace oil, the official said.



According to the merit order, the Power Division is required to generate 6,500-7,000 megawatts of electricity with the help of LNG before any furnace oil-based plants are made operational. Total demand for LNG stands at over 1,200 mmcfd for power production.

Published in The Express Tribune, June 27^th, 2018.

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