KE gets nod to construct gas pipeline

Company will receive gas supply via new pipeline at its RLNG-fired power plant at Bin Qasim

The Oil and Gas Regulatory Authority (Ogra) has allowed K-Electric to construct and operate a short distance pipeline to receive gas supplies for its forthcoming RLNG-fired 900-megawatt power plant at Bin Qasim from state-owned Pakistan LNG Limited (PLL) this year.

PLL would supply 150 million cubic feet of gas per day (mmcfd) through the dedicated pipeline to the Karachi-based power firm via Sui Southern Gas Company’s (SSGC) infrastructure.

The pipeline would be capable of transporting up to 250 mmcfd of gas. The supplies would be in addition to the ones that are being received by K-Electric from SSGC for a long time. The two companies are fighting a case in court to settle dues worth billions of rupees to be paid by K-Electric to SSGC.

“K-Electric is liable to lay the pipeline, which will handle up to 250 (mmscfd) of RLNG supply,” Ogra said in its decision while awarding the licence to K-Electric to construct and operate the pipeline.

A K-Electric spokesperson said that the company aimed to complete the construction of 2.4km-long pipeline in the vicinity of Bin Qasim by March-April 2021 so that one of the two 450MW RLNG-based power plants could be made operational by the forthcoming summer season.

K-Electric is expected to lay the pipeline at a cost of $4 million, while the two RLNG-based power plants of 450MW each are being set up at a cost of $651 million, according to Ogra. SSGC managing director, while speaking at a public hearing conducted by Ogra before the award of licence to K-Electric, said that the power company was a major defaulter of SSGC.

The total receivable amount as of September 30, 2020 stood at Rs115.91 billion (including Rs82.26 billion in late payment surcharge from July 2012 to July 2020. If K-Electric is allowed to lay and operate the pipeline, then it is likely that the power company would never pay off the outstanding balance to SSGC as it will no longer require SSGC’s supplies, said Ogra.

K-Electric representatives clarified at the hearing that the outstanding gas bill/ arrears mainly pertain to the late payment surcharge and the same is under litigation before the Sindh High Court.

“Heads of agreement with Pakistan LNG Limited for supply of 150 mmcfd of gas to BQPS-III (900MW RLNG-run) has already been signed,” said a K-Electric press statement.

“Subsequent to this, negotiations on the gas sale agreement (GSA) have reached advanced stage and potential hurdles need to be resolved as per past commitments by the Cabinet Committee on Energy (CCOE).”

“CCOE approved 150 mmcfd of RLNG supply to K-Electric while legacy issues (including the pending gas sale agreement) between SSGC and K-Electric were still prevailing…,” according to the Ogra licence order.

K-Electric said the 2.4km pipeline would be laid from Tie-in Point, SSGC Custody Transfer Station located at Bin Qasim, to K-Electric Bin Qasim Power Complex. The RLNG projects would help bridge the power company’s supply-demand gap in Karachi in the years to come.

“The addition of the 900MW RLNG power plant along with proposed decommissioning of older and lesser efficient units will ultimately increase the power utility’s generation capacity and lead to improved service delivery,” said K-Electric.

Gas turbines and steam generators have arrived. The second unit of 450MW can be brought online by the end of 2021, it said.

Published in The Express Tribune, January 8^th, 2021.

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