ECC approves LPG-Air mix at $25 per mmbtu

Induction of mix into gas system likely to cause 9% increase in gas prices.

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) on Thursday came under fire in a meeting of the Economic Coordination Committee (ECC) for opposing a plan that involves injecting LPG-air mix at $25 per million British thermal unit (mmbtu) into the Sui Southern Gas Company (SSGC) system.

Ogra has continuously opposed the project on the grounds that it will cause a sharp increase in the cost of gas to the end user. The regulator has insisted, in order to protect consumers, that such plants should be standalone and not be made a part of the larger system.

It is expected that all gas consumers, except domestic consumers, will face an increase in gas prices of up to 9.9% with the injection of 50 million cubic feet per day of LPG-air mix approved by the ECC.

Ogra authorities informed the ECC that LPG-air mix projects were not economical as they would jack up prices for gas consumers. They pointed out that the LPG-air mix price would be $25 per mmbtu, against the existing gas price of $3 to $4 per mmbtu. They further said that the price of furnace oil, if calculated at gas price, came to about $17 per mmbtu.

The oil and gas regulator insisted that the co-mingling of LPG and air was not feasible, and had not been adopted for this reason in other parts of the world. Its officials had informed the ECC that only Argentina had installed such projects. Petroleum ministry authorities, however, insisted that the cost of LPG-air mix would not be passed on to domestic consumers, and this project should therefore be approved.

The petroleum ministry had also arranged a briefing during the ECC meeting on the project, which tended to focus more on the pros than the downsides of the project. It was during this briefing that the presenter accepted Ogra’s contention that Argentina is the only other country in the world which has installed LPG-air mix plants.



The regulator had also pointed out that the project was still in the process of being approved by the SSGC. Ogra representatives in the meeting said that the finance committee of the board of directors of SSGC had cleared the project, and that it was now awaiting the approval of the board of directors. Ogra said this approval was a requirement before the ECC could give its nod to the project or reject it.

Nonetheless, the ECC has jumped the gun in approving the deal: it has done so even before the SSGC board of directors has decided what to do with the LPG-air mix project. During the meeting, only the law minister had some questions, whereas all other ECC members voiced their support.

Published in The Express Tribune, January 11^th, 2013.

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