LNG import plan in jeopardy as companies miss deadline

All three importers fail to provide documents within stipulated time.

Zafar Bhutta May 01, 2012

ISLAMABAD: The LNG import plan has been put in jeopardy as all three LNG importers – Turkish firm Global Energy, Pakistan Gas Port and Engro Corporation – have failed to complete the prerequisite requirements within the stipulated time of six months.

The importers have not even found their global buyers as yet, said an official requesting anonymity.

Oil and Gas Regulatory Authority (Ogra) may now cancel the pipeline allocation given to the importers to transport 1.4 billion cubic feet gas per day to consumers.

“The influential LNG lobby is trying to seek an extension in financial close relating to pipeline capacity allocation,” a senior official of the petroleum ministry said. Financial close is the completion of documentation process and the business model has been satisfied.

Ogra allocated pipeline capacity to the three LNG developers in October 2011 to use the pipeline network of state-run gas distribution companies for transporting imported LNG to consumers.

“LNG importers were expected to provide financial arrangements, agreements with LNG suppliers and end-buyers to complete the financial close by April-end but they failed to furnish it,” an official said.

Gas distributors Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) were also directed to invest $1.2 to $1.4 billion to lay new pipelines and create extra room for LNG suppliers. At present, SSGC has the capacity to transport 500 million cubic feet of LNG per day.

“Now, it’s in Ogra’s hands whether to revoke the capacity allocation or extend it,” a senior government official said.

Global Energy committed to bring the first consignment of 500 mmcfd by June-end followed by Engro in December 2012 and Gas Port in the first quarter of 2013. Ogra had allocated pipeline capacity of 500 million cubic feet per day (mmcfd) each to Global Energy and Engro and 400 mmcfd to Pakistan Gas Port.

At time of granting capacity allocation, Ogra had warned LNG developers of cancellation and encashment of bank guarantees if they failed to bring gas into the country within the scheduled time.

“The government has also reduced bank guarantees of these developers from $10 million to $5 million even though they failed to complete financial close relating to capacity allocation within the agreed time,” an official said.

According to the terms and conditions, LNG importers were expected to furnish performance bank guarantee of $10 million, en cashable in Pakistan, within 90 days of capacity allocation.

Published in The Express Tribune, May 2nd, 2012.


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