Allocation of gas to new LNG terminals opposed

The Petroleum Division has strongly opposed the proposal of Maritime Affairs Division for allocating the existing capacity in gas pipeline to the upcoming two new liquefied natural gas (LNG) terminals at Port Qasim, Karachi, saying that they should “come online first”.

“These new terminals are only on paper and no construction work has yet been initiated,” the Petroleum Division officials apprised the members of the Cabinet Committee on Energy (CCoE) during a meeting on Monday.

They said the suggestion was against third party access rules that allow private parties to market gas through a competitive process.

Earlier, the government had announced a new policy for five private parties to set up LNG terminals. The Oil and Gas Regulatory Authority had also notified third party access rules that allow private parties to sell and market gas through a competitive process.

The sources said that during the meeting, the Petroleum Division officials said that it was against those rules to allocate existing gas capacity to upcoming terminals.

“It will create a monopoly of upcoming LNG terminals planned by Energas Terminal Pvt Ltd and Tabeer Energy Pvt Ltd and deprive others,” they said, adding that three other parties like Pakistan Gas Port Ltd, Engro and Global Energy were also working on setting up terminals.

The Petroleum Division officials argued that the capacity in the gas pipeline should be allocated on first-come-first-served basis.

Secondly, they said, the division would allocate capacity in the gas pipeline to the upcoming LNG terminals when they come online.

Following reservations of the Petroleum Division, the CCoE formed a committee comprising Minister for Maritime Affairs Ali Zaidi, Petroleum Minister Omar Ayub, Special Assistant to Prime Minister on Petroleum Nadeem Babar and Special Assistant to PM on Power Tabish Gohar.

In its meeting on August 2, 2019, the Cabinet Division decided that all five parties, who had conducted QRA on the sites assigned to them, may be issued provisional Letter of Intent (LoI).

The Ministry of Maritime Affairs in collaboration with the Petroleum Division had facilitated the new LNG terminal developers in securing the No Objection Certificates (NOCs) from various ministries/departments for expeditious completion of the new terminals.

The Petroleum Division was to undertake and commit to the new terminal operators for allocation of LNG in the existing pipeline on first-come-first-served basis and providing capacity to both the terminal operators in the newly planned gas pipeline within 30 days so that formalities could be completed by the operators for establishing the terminals.

The Ministry of Defence had issued NOCs to both the new terminal developers.

Both of them had vowed to complete the project at the earliest and requested to allocate them the existing pipeline capacity to complete the projects.

In order to provide capacity in the existing pipeline to the new LNG developers and to attract foreign investment, the Maritime Affairs Division had recommended transferring existing pipeline capacity to the new terminals.

Any capacity, whether “unutilised” or “excess”, is offered to private parties only on a short-term three-month forward visibility basis, after approval from all relevant stakeholders based on the Economic Coordination Committee of the Cabinet decisions.

The ministry requested directing the gas transmission companies to share the draft Gas Transmission Agreement with both the new LNG terminal developers, which may be finalised before the grant of transmission/transportation licence by Ogra.

“OGRA may be directed to expedite the issuance of all relevant licences after fulfilling all codal formalities.”