Private sector may be allowed LNG distribution
At present, the second LNG terminal at Port Qasim has handling capacity of 750 million cubic feet per day (mmcfd), of which the government utilises 600-mmcfd capacity. The remaining is lying idle and has not been utilised.
Third-party access rules are already in place and in line with those the Oil and Gas Regulatory Authority (Ogra) has allowed gas marketing by the private sector. However, the government has yet to take decision on allocating additional capacity of the second LNG terminal to the private sector.
The Economic Coordination Committee (ECC) of the cabinet, which is scheduled to meet on Wednesday, is likely to approve the opening of Pakistan’s LNG market for distribution and marketing by the private sector.
The government has already allowed five interested market players including ExxonMobil, Eni, Mitsubishi, Trafigura and Bahria Foundation to participate in bidding for the third LNG terminal.
“The decision of the Pakistan Tehreek-e-Insaf (PTI) government to allocate some capacity of the second LNG terminal to the private sector will bring foreign investment in the LNG sector,” the official said while pointing out that the government had been paying millions of dollars in capacity charges to LNG terminal operators due to failure to utilise the entire dedicated capacity.
“It will also lead to utilisation of pipeline capacity of the two gas utilities of the country, which has been lying idle in the wake of decline in domestic gas supply. There will be no burden on the government and the respective sectors consuming LNG will bear the cost,” the official said.
LNG consumers have already paid an additional $45 million in 2018 because of unutilised capacity of LNG terminals and estimates suggest they will bear an extra cost of $40 million in the ongoing year if the full terminal capacity is not utilised.
According to officials, the decision on allocating spare capacity of the second terminal will reduce risk for the government and slash the losses faced by state-run utilities. They said no government guarantee would be involved in that matter and investment by the private sector would increase.
Officials pointed out that the prime minister had given directive on February 12, 2019 for exploring the possibility of contracting an additional 200 mmcfd of LNG at reduced rates to meet the demand-supply gap. The government has also planned to make arrangements for the import of more LNG before winter this year to meet energy requirement in the country.
At present, according to the officials, the National Accountability Bureau (NAB) is conducting an investigation, therefore, it will be appropriate that terminal operators allocate additional re-gasification capacity, if any, to third parties on a commercial basis in accordance with provisions of their services agreements.
In order to deliberate on the availability and utilisation of additional re-gasification capacity beyond 600 mmcfd contracted by Pakistan LNG Terminals Limited (PLTL) at the second terminal, a meeting was held under the chairmanship of petroleum secretary on May 6, 2019.
During the huddle, the chairman of Pakistan GasPort Company (PGPC), which runs the second LNG terminal, argued that there was no clause in the operations and services agreement (OSA) between PGPC and PLTL that bound the former to allocate additional capacity to PLTL.
It was decided that since there was no binding clause in the agreement, then it was PGPC’s prerogative to allocate the spare capacity to any party in its own best commercial interest.
Published in The Express Tribune, July 31st, 2019.
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