KARACHI:
The decision of the Economic Coordination Committee (ECC) to divert liquefied natural gas (LNG) imports for use in automobiles has come as a shock for bulk consumers like power plants and the industry.
Since the LNG import project was approved last year, the government has been promoting the case of bringing relatively expensive gas as a substitute for furnace oil, which will drain billions of dollars from foreign exchange reserves.
According to the Ministry of Petroleum’s plan brought before the ECC, about 600 million cubic feet of natural gas per day (mmcfd) being consumed by CNG filling stations will be spared for power plants while imported LNG will be used in automobiles.
For this purpose, the ministry has even proposed that the government forego tax on LNG so that the difference between the price of petrol and CNG could be maintained.
“This doesn’t make sense. Existing price of gas is around $4 per mmbtu (million British thermal units) and LNG will cost $16-17 per mmbtu. How can the government keep CNG cheaper than petrol?” asked Masood Siddiqui, former managing director of Oil and Gas Development Company Limited (OGDCL).
Industry experts have long argued against gas allocation for CNG use, especially when power plants and factories remain shuttered around the country due to gas shortages.
Pakistan produces around 4 billion cubic feet of gas per day (bcfd) against the demand for over 6bcfd. First LNG shipment of around 200mmcfd is expected in March next year but no firm supply agreement has been inked yet.
CNG consumption in cars was promoted in early 2000s as policymakers didn’t foresee a surge in demand on the back of economic growth.
Slowly within few years, the CNG pumps were sucking 10% of the national gas grid’s supply. The sector now consumes 15% of total production.
The government has tried to restrict the use of CNG by imposing a ban on the import of CNG kits without much success. Hub Power Company’s former CEO Javed Mahmood says CNG use only makes sense if it is consumed entirely in public transport. “That way, the government wouldn’t have to subsidise the Metro bus service like it does right now.”
Pakistan committed a big mistake by building an extensive pipeline infrastructure, which mainly caters to the needs of households, he said. “You won’t find such a pipeline network anywhere in the world.”
Similarly, the fertiliser plants, which receive subsidised gas, should have been built in countries like Qatar and Saudi Arabia. “If only we had improved our relations with these countries and made investments in such plants there, the debate wouldn’t have taken place.”
“The best government can do right now is to encourage petroleum production domestically by offering incentives to exploration companies,” he said.
CNG body praises decision
The All Pakistan CNG Association praised the ECC for allowing LNG use in CNG stations. “The supply of LNG to CNG stations in Punjab will help them run their pumps for seven days a week,” said Ghiyas Abdullah Paracha, the association’s leader, in a statement.
Now, he said, the filling stations across Punjab would be operational soon, helping investors as well as consumers, while outlets in Sindh, Balochistan and Khyber-Pakhtunkhwa would continue to get natural gas according to Article 158 of the Constitution. “LNG would be 30% to 35% cheaper compared to petrol,” he said.
Published in The Express Tribune, September 12th, 2014.
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COMMENTS (6)
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this refers above mentioned comments I suggest immediately stop increasing consumer base by new conversion goverment imposed ban on import of kits n cylinders only cng station owners. government giving special permissions to theie blue eyed people n kits n cylinder coming illegally requested to inquire who is importing n who is involved in smuggling only OGRA can do it. approximately 500 vehicles per day adding the consumers only in karachi. no cng pump owners are allowed to import kits since 2010. s h jafri
@Sara: Think you are mixing up LNG and LPG. LNG and CNG are effectively the same thing in different forms. LNG will be converted into gaseous form at the LNG terminal at port Qasim and will be fed into SSGC pipeline network. From here onwards, it is no different from the gas that is supplied to households and CNG pumps.
Its magic trick, makes money in your pocket disappear and appear in some swiss or camen island account. You just no longer have access to it. Democracy Zindabad.
The plan is very simple. Make car owners switch to LNG by shutting down CNG stations gas supply. No one who would use expensive LNG in industry.
Once the demand picks up, six months to one year down the road start adding taxes and the consumers are back to square one.
If India gets LNG for 11 dollars and we are planning to get the same for 18 dollars, 7 Dollars plus differential goes in whose pocket???
Pakistan again going to commit a big mistake by importing LNG rather than promiting petrol Govt should offer petrol rather than any gas for vehicle. How costly it would be does not matter.
Why was building a pipeline network bad for Pakistan?