Ogra will determine the re-gasified LNG price on similar terms as those set for petroleum product pricing without going through public hearing. STOCK IMAGE
The government is expected to monitor and set prices of liquefied natural gas (LNG) in line with the model of monthly oil price revision that gives margins to state-owned companies.
The regulation of market, if undertaken, will lead to higher prices of LNG, which the country started importing a few days ago.
According to normal procedures, gas prices are determined in public hearings after seeking comments of all stakeholders concerned. However, the LNG price has been exempted from public hearings.
Officials familiar with the developments said the Oil and Gas Regulatory Authority (Ogra) would determine and notify every month the price of re-gasified LNG supply to different consumers. These include power plants, other bulk consumers, fertiliser producers and compressed natural gas (CNG) filling stations.
The price will include margins for Pakistan State Oil (PSO), Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) and tolling fee for LNG shipment handlers.
The consumer price will cover LNG price DES (delivery ex-ship), PSO’s margin, technical charges, SSGC’s administrative margin, SSGC’s cost of service and/or transportation charges, SNGPL’s cost of service and/or transportation charges and transportation and distribution losses.
Ogra will determine the re-gasified LNG price on similar terms as those set for petroleum product pricing without going through public hearing.
According to officials, re-gasified LNG supply to independent power producers (IPPs) will be on as-and-when-available basis without any take or pay clauses subject to assurance of payments. IPPs will have to provide a minimum 15-day firm schedule for LNG supply.
The LNG volume that will not be picked by the IPPs will be offered to other bulk consumers at a price determined by Ogra.
Re-gasified LNG may also be provided to fertiliser plants and CNG filling stations at a price set by Ogra.
The LNG price and volume sold to consumers may be fenced and considered separately for unaccounted-for-gas (UFG) benchmarking and disallowance purpose only.
The additional LNG volume delivered to the third party to meet the required British thermal unit (BTU) content is currently treated as UFG according to Ogra rules. However, these may be amended under which such additional volumes will not be subjected to UFG penalties.
Fifty per cent of transportation charges will be treated as non-operating income for both gas transmission and distribution companies. Ogra’s relevant rules will be amended in this regard.
Fauji Kabirwala Power Company may also be allocated LNG based on approval of the Economic Coordination Committee on January 23 with an equivalent reduction for Kot Addu Power Company (Kapco). Separately, the gas sales agreement of Rouch Power is expiring in June.
Therefore, allocation of re-gasified LNG to them is being proposed by replacing 100 million cubic feet per day (mmcfd) of LNG allocation to the Nandipur power plant, which is likely to take time to prepare for receiving LNG supply because of technical modifications being made in the plant.
To keep the option of commissioning an LNG terminal through PSO, the company may be allowed to import one cargo through the Floating Storage and Re-gasification Unit (FSRU) on free-on-board basis or LNG carrier on delivery ex-ship basis under the LNG sales and purchase agreement.
Published in The Express Tribune, April 8th, 2015.
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