ECC dismisses report on LNG terminal

Directs Petroleum Division to come up with a document covering all aspects

ISLAMABAD: The Economic Coordination Committee (ECC) of the cabinet has dismissed the Petroleum Division’s initial report on Engro Elengy Terminal Private Limited (EETPL) and directed it to provide details covering all aspects of the first liquefied natural gas (LNG) terminal set up by the company in the country.

The ECC, in its recent meeting, was presented a report by the Petroleum Division, which was then directed to come up with a comprehensive report on the liquefied natural gas (LNG) terminals established in the country, indicating all aspects with reference to agreements, capacity utilisation, collection of charges, equity involved and rates of return.

The Petroleum Division informed the ECC about the LNG services agreement  signed between Sui Southern Gas Company (SSGC) and EETPL on April 30, 2014 for a period of 15 years. The terminal started operations on March 28, 2015.

It was informed that contractual obligations of EETPL were up to annual average of 600 million cubic feet per day (mmcfd). Contractual quantity for the first year was 1.5 million tons per annum or annual average of 200 mmcfd.

Contractual quantity for the second to the 15th year was 3 million tons per annum or annual average of 400 mmcfd. Another contractual quantity comes after the procurement of additional annual average of 200 mmcfd. The meeting was informed that capacity charges for the first year were $272,479 per day whereas capacity charges for 2-15 years were $228,016 per day. It was also informed that EETPL’s terminal capacity had not been underutilised so far.

The ECC noted that the information regarding the equity involved in the establishment of LNG terminals and rates of return was not given in the presentation. The committee sought relevant financial details for its consideration.

According to officials, the terminal had been running at a low capacity of 400 mmcfd till December 2017. It had asked the government to allow utilisation of the remaining 200 mmcfd capacity by the private sector, which would bring down the capacity charges. However, the previous Pakistan Muslim League-Nawaz (PML-N) government did not give the permission, which resulted in higher terminal charges of $1.45 per million British thermal units which were passed on to consumers.

In December 2017, Engro and SSGC signed a deal for utilising the idle capacity of the LNG terminal.

According to the officials, the financial bid, submitted by EETPL, was endorsed by an international consultant and was in compliance with the request for proposal (RFP) for building the terminal.

The consultant had also revealed that there was no conditionality attached to the EETPL price proposal. It pointed out that in order to provide an independent analysis of the EETPL’s price proposal, it had undertaken a comparison.

The ECC at that time decided that a process compliant with the Public Procurement Regulatory Authority (PPRA) rules must be initiated, therefore, the Inter State Gas Systems (ISGS) invited a tender in September 2013 for the construction of an LNG terminal with capacity of 3 million tons per annum on a continuous basis.

Published in The Express Tribune, October 4^th, 2018.

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