Productive day: ECC clears LNG projects; allows export of sugar

Also discusses additional imports of urea; renews govt guarantee for Pakistan Steel.

ISLAMABAD:

While addressing a press conference on Wednesday, Adviser to the Prime Minister on Petroleum and Natural Resources Dr Asim Hussian revealed that the ECC had approved three LNG import projects tabled before the body, under which a billion cubic feet gas per day (bcfd) of the fuel will be imported.

The ECC, which had met with Finance Minister Dr Abdul Hafeez Sheikh in the chair on the same day, also approved the export of 0.2 million tons of sugar. However, the ECC did not approve another summary regarding the import of urea, but constituted a committee to consult with stakeholders in this regard.

Under the proposed LNG import plan, the government will float two tenders, each for the supply of 400 million cubic feet per day (mmcfd) of the fuel on a long-term basis. These contracts will hold for a 15-year period, and the contract prices of the fuel will be revised every five years. These projects will take over two years to be implemented, Hussain said.

“The government will also import 200mmcfd of LNG on a fast-track basis; purchasing the fuel on spot by using the Progas terminal owned by Sui Southern Gas Company Limited (SSGC),” he said; adding that Sui Northern Gas Pipelines Limited and SSGC will invest money from the Gas Infrastructure Development Cess (GIDC) to finance the project through a special joint venture company. He also stated that a separate pipeline network would be laid for the project to avoid transmission and distribution losses.

“This short-term project will be completed within 12 to 18 months,” he said; adding that the imported LNG will be given mainly to the power sector. Electricity generation companies will open Letters of Credit (L/Cs) against supplies from gas utilities in this regard.

“Companies which have secured LNG terminal licences will be eligible to participate in these projects,” he added.

He also revealed that the ECC has approved the issuance of revolving guarantees by gas companies, which are to be provided to gas suppliers. He said that the imported LNG will be used as an alternate fuel to furnace oil, and will produce cheaper power compared to electricity produced on furnace oil-based plants.

Replying to a question, Hussain said that Netherlands-based 4Gas – developer of the scrapped Mashal LNG import project – had become bankrupt: the 4Gas Asia firm, which still exists, could participate in the tender, he said.

During the press conference, he also clarified that the government will not shut down CNG stations overnight. However, he said that such stations will be phased out, as they are a burden on the government.

According to a statement issued, the ECC was informed that the country is in a position to export sugar as there are sufficient surplus stocks, while higher production is also expected in the next sugarcane crushing season. After deliberations, the ECC allowed export of 200,000 tons of sugar, against the proposed quantity of 400,000 tons. It also set a quota of 10,000 tons for each sugar mill.

The ECC also constituted a committee comprising the prime minister’s adviser on Agriculture and Water Resources and the secretaries of commerce and industries to find out the reasons behind non-utilisation of an export quota for 166,000 tons of sugar approved earlier.

The committee discussed a summary proposing the import of 0.5 million tons of urea. After evaluating different aspects, the ECC constituted a committee comprising the deputy prime minister and the senior minister for industries, the minister for petroleum and natural resources, the deputy chairman of the Planning Commission and the industries secretary to further elaborate the mechanism of the subsidy on fertiliser, the price fixation formula, and the availability of gas to fertiliser plants after consultation with fertiliser industries. It also approved the renewal of a Government of Pakistan guarantee, totalling Rs2.0 billion, for Pakistan Steel Mills.

The ECC additionally approved granting indemnity for the implementation of hydropower projects in the Azad Jammu and Kashmir (AJK) territory, to the effect that if the AJK Implementation Agreement or the Water Use Agreement becomes illegal, void, invalid or unenforceable due to changes in the laws of AJ&K or Pakistan, the Government of Pakistan shall indemnify the project company or the lenders for any cost, loss or liability resulting from such illegality, voidness, invalidity or unenforceability.

Published in The Express Tribune, October 4^th, 2012.