Consumption by CNG stations: SNGPL seeks to take control of LNG supply

If allowed, tax concession will go and CNG prices may rise Rs14 per kg.

Our Correspondent May 12, 2015
ECC had slashed sales tax on imported LNG for the CNG stations in a bid to keep the gas 30% cheaper compared to petrol. PHOTO: ONLINE

ISLAMABAD: Sui Northern Gas Pipelines Limited (SNGPL) – a state-owned gas distribution and transmission company – has expressed the intention that it wants to take control of liquefied natural gas (LNG) supply to compressed natural gas (CNG) filling stations, a demand, if agreed, will lead to an increase of Rs14 per kg in CNG prices.

“SNGPL wants to take ownership of imported LNG and the CNG sector should deposit money with the company for its supply,” an official told The Express Tribune quoting a letter sent by the gas utility to the Ministry of Petroleum and Natural Resources on May 11.

“This has upset the ministry as the demand is not in consonance with the decision of the Economic Coordination Committee (ECC).”

The committee had slashed sales tax on imported LNG for the CNG stations in a bid to keep the gas 30% cheaper compared to petrol. Such incentives are for the private sector and if SNGPL regulates LNG supply, the CNG stations will enjoy no concession, instead they will have to pay Rs14 per kg more for the purchase of LNG.

According to officials, incentives were given to private-sector players like CNG pumps and fertiliser manufacturers in order to meet their gas needs at an affordable cost.

“SNGPL cannot take such a decision on its own as it will violate the ECC’s directive,” the official said, adding the gas utility had already called on the government to determine the weighted average price of LNG, which would also put the burden on those consumers who would not be consuming it.

Influential lobbies in the power and industrial sectors have also pressed the government to calculate the weighted average price keeping in view the rates of imported LNG and locally produced natural gas. Power producers have already refused to bear the cost of expensive LNG and are also reluctant to open standby letters of credit for LNG imports.

Earlier, different stakeholders criticised the government for making it mandatory to import LNG through the state-owned Pakistan State Oil (PSO). Two ships have been brought by PSO through spot purchases on behalf of the private sector.

However, officials say Public Procurement Regulatory Authority (PPRA) rules strictly bar PSO from spot purchases of LNG without competitive bidding. The private sector is no excuse as every product is imported for the private sector through bidding. More than a dozen companies had expressed interest in response to PSO’s invitation of bids last year.

“SNGPL is a distribution company and not an importer, on the other hand PSO has been designated an importer, but it is for the government-to-government deal with Qatar and not for the private sector,” the official remarked.

At a press conference, Petroleum Minister Shahid Khaqan Abbasi clearly said the private sector was not bound to import LNG through PSO and could buy the gas through its own resources.

The government is already facing hurdles in the way of payments for LNG supply and has, therefore, failed to ink the deal with Qatar. However, the application of weighted average price will help gas utilities to take control of LNG supply, which they want.

Published in The Express Tribune, May 13th,  2015.

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