Pakistan

OGRA sets LNG price ahead of Qatar deal

Price determination was one of the prerequisites to the supply agreement

Zafar Bhutta October 07, 2015

The regulator observed that the tripartite agreement, which regulates the supply chain between PSO, SNGPL and SSGC, had not yet been signed. PHOTO: FILE

ISLAMABAD:

The Oil and Gas Regulatory Authority (Ogra) on Wednesday finally set a provisional price for liquefied natural gas (LNG) in the larger public and national interest.

The price was determined despite several deficiencies in the LNG import process and this development will pave the way for a $21-billion LNG supply deal with Qatar.

The determination of the price was one of the pre-requisites to the long-term LNG deal. It is likely that officials from the petroleum ministry will fly to Qatar in the next few days to finalise the deal.

The Ogra decision comes as a blow to the LNG terminal operator, Pakistan State Oil (PSO) and gas companies that were making money from the consumers by charging different prices.

PSO has paid $58 million to the LNG terminal operator at the rate of $1.4 per million British thermal units (mmbtu) but Ogra has allowed a tariff of $0.66 to the terminal on the supply of 11 cargoes.

Read: OGRA proposes slashing fuel prices

Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) had also charged 28 cents and 52 cents per mmbtu respectively in transmission fee which the regulator has disallowed.

Earlier, the Ministry of Petroleum had set a provisional price subject to adjustment by the regulator.

Now, the gas companies and the LNG terminal operator would have to adjust the revenue collected from the consumers.

The regulator has noted various deficiencies in LNG imports from Qatar on spot purchase basis. Ogra said the information provided by PSO had been evaluated and it was observed that the LNG framework was suffering from fundamental shortcomings.

“A long-term LNG supply agreement with Qatar is necessary but it has not been signed yet,” an Ogra official said.

The regulator said a tripartite agreement, which regulates the supply chain between PSO, SNGPL and SSGC, had also not been signed. It noted that an agreement with the end-consumers had also not been provided, despite PSO being required by law to provide details that LNG activities were governed under the tripartite agreement.

The regulator has set the price of LNG at $8.63 per mmbtu and reduced the PSO’s margin.

PSO had suggested the price in the range of $10.35 to $11.42 per mmbtu, when the average LNG price stood at $7.72 per mmbtu.

Read: OGRA close to determining LNG price

PSO had demanded a 4% margin approved by the Economic Coordination Committee, but the regulator allowed only 1.82%. The authority had also disallowed administrative margins of gas companies up to $0.05 per mmbtu.

Additionally, gas companies have been barred from recovering service charges from the consumers.

Talking to The Express Tribune, All Pakistan CNG Association leader Ghiyas Paracha said now the price of CNG would come down by Rs4 per kilogramme. He hailed the Ogra’s decision and said the current price of CNG was Rs59 per kg and it would come down to Rs55 per kg following the LNG price determination.

Published in The Express Tribune, October 8^th, 2015.

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COMMENTS (2)

Dr Musadik Malik | 9 years ago | Reply The disastrous decision of Chairman and his inept team at OGRA, our regulatory authority has killed the purpose of Importing LNG, which is much cleaner fuel than Coal. Shahid Khaqan Abbasi, one of the most generous person perhaps this country has ever seen, has tried his best to overcome energy crisis by spending his valuable time in setting not only first LNG terminal in Pakistan but all in vain. Oil lobby and PTI both, are spending millions of dollars and media disseminates the news that they have shelved the LNG projects. It is sad to see that media does not acknowledges the fact that he is doing so much for the students, retired government officials, journalists. It’s observed that not a single person is homeless in his town and all of them have the benefit of free education and stipends amounting to thousands. He is undoubtedly our National Hero and deserves to be praise. He has helped in the eradication of poverty from Pakistan. The fact that he is the biggest donor to Islamabad hospitals proves it. His upcoming project includes starting up of an engineering institute where education given would be free along with free ipads. In addition, he plans to reward 50,000 rupees to students who have achieved A grades in their A-levels and F.sc results. Housing schemes that has recently initiated for all students but unfortunately is not for the journalists. Those who have achieved first division in their bachelor or master exams are awarded with 50,000 cash and will be fully funded for any of their future education programs. Furthermore, he is starting a Housing scheme which would be nothing in front of Bahira Town and all those students who acquire almost 290 out of 340 in the GRE, will also get free plots in the scheme. All those who follow these criteria may message on ---. He has ensured that there are almost 25 water plants in Thar and now the overall dynamics of that area has changed. In addition, he is the only MNA of Pakistan who does not take a single penny form the Government of Pakistan. In coming months, he is also going to initiate a vehicle service scheme for all the government officials having service of above 25 years and will grant them free vehicles. It is seen that all the democratic parties in USA are trying to get time from him and wants him to support them in their election campaigns. 80% of the students studying in the Harvard University are fully funded by this man. Chairman OGRA has neither the capacity nor the vision. His own appointment seems to be controversial. Based on my own vast experience in energy sector, especially in LNG sector, I can say that LNG is not the only solution but also affordable even if the landed price is more than USD 20 per MMBtu. For the reads, I would like to share that when I was the one the Director of Qatargas Company, I made revolutionary changes in LNG. It was because of efforts that Japan agreed on buying LNG at the rate of USD 18 MMBtu. When the first shipment of LNG delivered to Japan in 1996, I was received by the prime minister of Japan in Tokyo, at the airport. Sadly, some media groups and OGRA is playing in the hands of Oil Mafia.

cautious | 9 years ago | Reply It ain't rocket science. Anyone who spend 1/2 hour on Google can figure out the cost of LNG as well as the std transportation and offloading cost - the biggest unknown is what the govt taxes/fees are. Any other country would probably set the taxes/fees upfront and let the actual landed cost of LNG determine the actual LNG charge. Next time around - it might be a good idea to determine whether you have the money to buy LNG before you make it part of your National energy strategy?

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