K-Electric’s tariff may go up due to LNG consumption

Company plans to import LNG, asks suppliers to submit EOIs

KARACHI: K-Electric may have to revise its power tariff upwards in the near future after it initiated work on importing liquefied natural gas (LNG), which is comparatively an expensive fuel than the locally produced gas which is being used these days.

The cost of power production on imported gas goes up by 42% to Rs9.49 per kilowatt-hour (kWh) compared to the one being generated by utilising locally produced gas at Rs6 per kWh in May 2019, according to the latest tariff calculation by the power regulatory authority.

K-Electric - which is the only integrated firm performing all three functions including power generation, transmission and distribution - is considering importing its own gas before a new 900-megawatt gas-fired power plant comes on line in 2021.

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The company has invited interested suppliers to submit expressions of interest (EOI) for the supply of at least 150 million cubic feet per day (mmcfd) of LNG from the fourth quarter (Oct-Dec) of 2020 for the next three and a half years till March 2024, an official of K-Electric told The Express Tribune.

Later, its requirement for imported gas is expected to surge to 250 mmcfd from the second quarter (Apr-Jun) of 2024. Therefore, the Karachi-based power firm has sought expressions of interest from interested suppliers for the provision of LNG over the next 15 years.

“K-Electric is exploring the option of LNG supply from private suppliers for the BQPS-III (900MW) project. Furthermore, K-Electric is also exploring LNG for its existing power plants - BQPS-I (50MW) and BQPS-II (560MW) - in line with the National Electric Power Regulatory Authority’s (Nepra) decision,” K-Electric said in a reply to The Express Tribune.

“K-Electric is seeking at least 150 mmcfd for BQPS-III which, due to capacity constraints in the existing re-gasified LNG terminals, will be arranged initially for 3.5 years from existing terminals and later for 15 years from existing or new terminals for better competition.

“Prior to commissioning of the BQPS-III, this supply of 150 mmcfd will be utilised at BQPS-I and BQPS-II. From 2024 onwards, the contract of 250 mmcfd for 15 years will cover re-gasified LNG requirement of both BQPS-II and BQPS-III.

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“However, if the suppliers are in a position to provide 250 mmcfd even during the short-term period, K-Electric is open to considering fulfilling LNG requirement of BQPS-II and BQPS-III from day one,” it added.

A source added that K-Electric is considering the option of importing gas in addition to the supply of around 180-190 mmcfd by Sui Southern Gas Company (SSGC), which is enough to meet existing fuel requirement of K-Electric.

It, however, remains unclear whether the entire 180-190 mmcfd is low-cost locally produced gas or expensive RLNG is included in the total amount of gas being supplied to the power firm.

“We are considering importing gas under directives of Nepra,” he said. “K-Electric may incorporate the additional cost of RLNG in the end-consumer power tariff by reviewing fuel charges,” he said.

K-Electric is considering the procurement of RLNG to be delivered at the plant gate of Bin Qasim Power Station (BQPS) located in Karachi, K-Electric said in a tender. “RLNG will be utilised to meet the fuel requirement of its two…power plants at Bin Qasim Power Complex,” it said.

“Bin Qasim Power Station-IIII is a new 900MW…power plant that is scheduled to begin operations in 2021,” it said. 

Published in The Express Tribune, July 24^th, 2019.

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