ISLAMABAD: With an increase in global liquefied natural gas (LNG) prices and a hefty depreciation of the rupee, the rates of imported gas in Pakistan have jumped up substantially.
The Oil and Gas Regulatory Authority (Ogra) – the industry regulator – has set the LNG price for consumers of Sui Northern Gas Pipelines Limited (SNGPL) at $12.8 per million British thermal units (mmbtu) and for consumers of Sui Southern Gas Company (SSGC) at $13.27 per unit.
These prices include terminal charges, transmission losses, Port Qasim charges and importer margins as well.
Import cost came in at $10.11 per mmbtu for Pakistan State Oil and $10.40 per unit for Pakistan LNG Limited.
However, in October 2015, the LNG price was at a lower level at $8.63 per mmbtu when crude oil prices – to which the imported gas rate was pegged – had weakened.
LNG suppliers of Pakistan have entered into contracts with Qatar, Italian energy giant Eni and global commodity trader Gunvor. Prices for LNG supply range between 11.6% and 13.37% of crude oil rate.
Pakistan has built two LNG terminals that have the capacity to handle 1.2 billion cubic feet of LNG per day, but the required quantity did not arrive at the terminals because of weak demand for imported gas.
A senior official of the Ministry of Energy (Petroleum Division) told The Express Tribune that they had not received firm LNG demand from power producers, which were using expensive furnace oil, but it would burden consumers with higher electricity tariff.
According to the merit order based on revised fuel prices effective June 7, 2018, the main LNG-based power plants are much higher in priority and produce cheaper electricity. LNG is an alternative fuel that replaces furnace oil in power production.
According to statistics for May, 19.30% of electricity was produced with the help of furnace oil at a tariff of Rs12.47 per unit whereas LNG fuelled the production of 23.85% of electricity at a price of Rs9.10 per unit.
With the launch of new state-of-the-art LNG power plants, the difference is set to widen further as their tariff is Rs7-8 per unit. Therefore, furnace oil-based electricity will be 60-80% expensive than LNG-fuelled power and cause a heavy loss to the national exchequer.
According to the official, the government had planned to import 600 million cubic feet of LNG per day (mmcfd) through the second terminal, but imports could not reach that level.
In line with the merit order, the Power Division is required to generate 6,500-7,000 megawatts of electricity with the help of LNG before the resumption of production by furnace oil plants.
The demand for LNG from power plants is estimated at around 1,200 mmcfd. However, delay in placing the demand has given an opportunity to the oil lobby to promote consumption of furnace oil in power plants.
Published in The Express Tribune, July 13th, 2018.