Lending support: OGRA backs plan to siphon LNG to CNG filling stations

Suggests government should set imported LNG price for consumers .

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) has put its weight behind the proposed plan of the Ministry of Petroleum that calls for allocating some liquefied natural gas (LNG) imports to compressed natural gas (CNG) filling stations and saving domestic natural gas supplies for power plants.

Giving its comments in response to the plan, the regulator for the oil and gas industry backed the proposal for LNG supplies, likely to arrive early next year, to the CNG industry, which was on the brink of collapse because of gas shortage, especially in Punjab, officials say.

However, it suggested that the government should determine the LNG price for the consumers.

The Ministry of Petroleum and Natural Resources has tabled a summary before the Economic Coordination Committee (ECC) of the cabinet, requesting permission for LNG consumption by CNG filling stations. The summary is expected to be approved in ECC’s next meeting.



Officials of the petroleum ministry stress that the government wants to save the Rs450-billion CNG industry with which about 300,000 skilled and unskilled workers are directly associated and 150,000 people are indirectly related.

At present, about 3.7 million vehicles, equipped with CNG conversion kits, run on gas in place of petrol.

The ministry has also set out a plan of fiscal incentives including exempting imported LNG from sales tax and gas infrastructure development cess (GIDC) to make it affordable for the people and keep a 30% difference between prices of petrol and CNG.

Currently, all bulk buyers of natural gas are paying GIDC at Rs300 per million British thermal units (mmbtu) and sales tax at 17%.

“This plan, however, will promise 24-hour gas supply to the consumers against only 72 hours a month these days with 30% cheaper cost compared to petrol,” a ministry official remarked.

“The regulator’s primary concern is to safeguard the interest of consumers, therefore, LNG should be cheaper than petrol,” an Ogra official said.

Since CNG stations would switch to imported LNG, the domestic natural gas, thus saved, would be provided to other bulk commercial buyers and the government would continue to receive the same amount of GIDC and sales tax, the ministry said. This would have no negative impact on government’s revenues, it added.

According to the ministry official, around $1.4 billion could be saved in oil imports every year by supplying LNG to CNG outlets and power plants will receive the gas spared by the filling stations.

Following the award of a contract by the government for construction of an LNG terminal, CNG is the first industry that has taken the initiative to seize the opportunity to ensure its sustainable future. This way, 628 million cubic feet of natural gas per day (mmcfd) will be diverted to the power plants to increase electricity production and control hours-long outages.

Meanwhile, Pakistan State Oil (PSO) has got LNG supply offers from international energy giants like British Petroleum and Royal Dutch Shell. First shipment is expected to arrive early next year after completion of work on the terminal.

“If the CNG industry is shut down, the vehicles running on gas will have no choice but to use petrol, which will lead to a significant increase in oil imports,” the petroleum ministry said.

At present, CNG stations need 478 mmcfd of gas for vehicles and around 150 mmcfd for power generation for the compressors. However, because of the high demand-supply gap, the sector is taking a hit in terms of reduced gas supplies.

“With the replacement of petrol by environment-friendly LNG, the carbon footprint of the country will improve by almost six million tons of greenhouse gas emissions per annum and will offset the emissions from upcoming coal-based power projects,” the ministry said.

Published in The Express Tribune, August 23^rd, 2014.

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