OGRA opens LNG imports, sales to private sector

Govt’s involvement in LNG business caused circular debt to balloon to alarming levels

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra), on Friday, granted an RLNG sale licence to the Pakistan GasPort Consortium Limited (PGPCL), marking the first steps towards allowing the private sector a piece of the LNG imports and sales pie.

Currently, state owned companies like Pakistan LNG Limited (PLL) and Pakistan State Oil (PSO) import LNG and gas utilities, and sell the commodity to customers.

Gas is a major part of Pakistan’s energy mix, and LNG producers and suppliers are keen to support Pakistan’s energy needs. However, due to the government’s involvement in the LNG business, circular debt has ballooned to an alarming level.

Ogra currently owes PSO over Rs300 billion due to the non-recovery of bills from domestic consumers who consumed gas during the last winter seasons. The previous governments had diverted LNG to the domestic sector in the winter seasons resulting in circular debt piling up.

While the private sector has been trying to import and market LNG for years, the monopoly of state-run companies has remained a major obstacle.

PGPCL has an LNG terminal with a capacity of 750 mmscfd RLNG, of which the government has allocated 600 mmcfd. The PGPCL management has been trying to utilise its own surplus capacity but has failed so far due to the involvement of the government.

“The licence plus agreement between PLL and PGPCL signed on August 3, 2022 will facilitate the first ever private sector LNG import and RLNG sale, thus opening the market to competition and more efficient practices,” said an industry official.

He added that, “This represents a big move forward as PGPCL has 100 mmscfd of excess capacity of its own and has given 50 mmscfd additional capacity (worth $6.1m annually) for free to PLL”.

“Now, the Economic Coordination Committee (ECC) has to okay the agreement signed between PLL and PGPCL for the utilisation of the surplus capacity,” the official added.

“The utilisation of PGPCL’s excess capacity will demonstrate the viability of the LNG business done entirely by the private sector without any government guarantees or risk,” he underscored.

“Putting in place the policy and legal framework to import LNG cargoes, on a spot or term contract basis, will encourage additional investment in this sector. This is imperative in view of the major LNG supplies coming online in 2025/2026,” the industry official remarked.

For import of third-party cargoes under Clause 9.4 of the Operation and Services Agreement (OSA), PGPCL has confirmed to PLL that the arrangement will become effective on the execution of the Third-Party Access Agreement.

Published in The Express Tribune, November 12^th, 2022.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.