LNG for CNG sector: CNG station owners form company

Attempting to move towards importing LNG independently

KARACHI:

Owners of around 1,200 compressed-gas pumps in Punjab, who are aiming to become the first to import liquefied natural gas (LNG) into Pakistan, have applied for a licence and registered a company for the purpose.

The special purpose vehicle named the Universal Gas Distribution Company has sought permission from the Oil and Gas Regulatory Authority (Ogra) to start operation in light of relevant rules and the decision of the Economic Coordination Committee that permitted the import of LNG for the CNG sector on September 11.



Industry representatives have already started negotiations with foreign banks for credit lines needed to import the LNG, said Ghayas Paracha, Chairman of the All Pakistan CNG Association.

“We have started meeting the formalities. It’s a small company right now but it will expand in the next three to six months,” he said. “You must keep in mind that this is for the first time that something like this is happening.”

Universal will have a management comprising officials of Sui Southern and Sui Northern gas companies, he said. “A foreign expert is being hunted for advising us on this project.”

Shares of the company will be distributed among the industry people participating in the project on the basis of the installed capacity of their CNG stations.



About the capital required for enabling the company to undertake imports, Paracha said that it will not be an issue at the start. “We are seeking investment from various financial institutions as well.”

Engro Elengy Terminal Private Limited (ETPL) will be ready to receive LNG consignments at Karachi’s Port Qasim by January 26, 2015.

The company has hired a floating storage and regasification unit (FSRU), a large ship with onboard liquid-to-gas conversion facility and storage tanks. These will be docked at a new jetty being built at the port to handle imported LNG.

The FSRU has capacity to handle an average of 600 million cubic feet per day (mmcfd) of gas. Pakistan government will use 200 mmcfd of the capacity to import LNG by itself for the first year and then expand the volume to 400 mmcfd. The Sui Southern Gas Company (SSGC), which will receive the LNG supplies into its pipeline network, has issued a standby letter of credit to the company, covering six months of payment for the tariff.

Industry people say the Universal Gas Distribution will sign agreements with SSGC and SNGPL for receiving gas at pumps in Punjab. The price of the gas will be based on the transported cost of re-gasified LNG.

Industry people say that LNG importer would need to arrange financing of at least $300 million for importing 200 mmcfd over a three-month period.

CNG station owners and government officials say that the SPV firm, Universal, will also be backed by the security deposits of the pump owners lying with SSGC and SNGPL.

Pakistan produces around 4,000 mmcfd of gas against a demand of over 6,000 mmcfd. The LNG project is expected to add around 10% to current supplies.

The CNG sector across the country uses approximately 600 mmcfd but with the shortage at power plants, fertiliser companies and households, many have started to question the rationale for using gas as fuel for vehicles.

This LNG-for-CNG model is premised on the notion that imported gas will continue to remain cheaper than petrol. Price of LNG has crashed international markets in recent weeks on weak crude oil.

Published in The Express Tribune, November 7^th, 2014.

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