LNG import for power sector in doldrums

ISLAMABAD: With 31 days left in invoking the penalty clause as per the agreement with the Elengy Terminal Pakistan Limited (ETPL) under which the government will have to pay $272,000 per day for not importing the LNG by March 31, the government has so far virtually failed to ink an LNG deal with any country, including Qatar.
Suppliers in international market are showing hesitance to supply LNG to Pakistan for power sector, which is virtually hit by circular debt and IPPs are not willing to make an agreement with LNG supply for back to back L/Cs.
However, the government wants to open ESCROW the suppliers by the IPPs, but suppliers are not willing to accept this mode of payment method, top official sources privy to the talks with Qatar told The News.This means that masses will not get relief in electricity provision at affordable prices and the power crisis will continue to haunt the nation this year too.
So the top mandarins in the Ministry of Petroleum and Natural Resources are quite upset over the fears, if LNG supply agreement was not inked by the government prior to March 31 for power sector, then the penalty clause agreed with Engro terminal will be invoked and it will have to pay $272,000 per day to the EPTL.
And on top of it, in case of failure to bring the LNG by March 31, then a new wave of rage from the masses will emerge on scene who are awaiting the import of LNG to overcome energy crisis in the country and this time the PTI led by Imran Khan may play important role to capitalise the expected wrath of the masses and build its protest campaign to dislodge the incumbent regime.
Fearing the backlash from masses over its eminent failure in importing LNG, the ministry of petroleum and natural resources has now decided to provide the imported LNG to CNG sector instead of giving it to the inefficient power sector which is unable to pay the payment to LNG supplier on time. The CNG sector has now emerged as the biggest private party which is

able to import LNG under back to back L/Cs payment mode.
The government wants to avoid the backlash from the masses and CNG sector has ostensibly appeared to bailout the government by agreeing to import LNG may be in the first week of March. In the summary to be pitched before the coming ECC meeting, the ministry of petroleum and natural resources will let the ECC know that IPPs are not willing to pay the payment to LNG supplier under back to back L/Cs mode and ministry of water and power has failed to enter into agreement with IPPs which is acceptable to the LNG supplier. So the imported LNG be allowed to be supplied to CNG sector so that this industry could stand on its feet as all the CNG stations in Punjab are virtually non operational since November 2014. The CNG sector will be provided the capacity for carrying out the LNG in sui northern and sui southern’s transmission and distribution system.
The cost and margins of PSO and gas utilities will be determined by Ogra.The UGDC—the company that will cater to the gas needs to CNG sector has arranged its own LNG supplier and also agreed to purchase LNG from PSO in case the government inks any deal with Qatar. The chief executive of the UGDC has written two letters to the government informing that it is all set to open back to back L/C for import of LNG and more importantly it also told the government the it is ready to buy the first LNG ship or commissioning ship so that the LNG terminal could be operational in any time in the month of March.
This means that the CNG sector will be able to bring the LNG for CNG stations much before the import of LNG by the government. However, the government will not be able to inject the LNG to power sector meaning by that the power crisis continue to persist this year.
The top officials said that Qatar has offered to the government the LNG supply at the 14.2% of three months average price of Brent and the ministry of petroleum and natural resources are upset over the offer of the Qatari authorities. Qatar is not ready to reduce the price as it does not want to irk its major clients such as Japan and other countries. Under this arrangement the LNG in Punjab will be available at $12 per mmbtu.
This means that the landed price of LNG at Karachi port will stand at $9-10 per MMBTU which will be exorbitantly at higher side. It is pertinent to mention that estimated landed costs of LNG in the month of March for many major capitals of the world are worked out by PLLATS at $7 per MMBTU in Japan, $6.90 per MMBTU in India, $6.60 in China, $6.51 in Rio de Janeiro, $7.16 in UK, $7.20 in Spain, $6.92 in Belgium.
Knowing the fact that crude oil has plunged by 60% in the international market, the land price of LNG at Karachi at $9-10 per MMBTU will give birth to a biggest scam of commissions and omissions out of LNG deal in the country.
Now the authorities at ministry of petroleum and natural resources have started saying that the fast track LNG project should have been initiated under integrated approach under which the LNG supply side should have also been handed over the company that had won the bid to construct the LNG terminal. This means that the government has admitted its failure in inking the deal with Qatar before March 31. However, the good news is that CNG sector will be getting imported LNG may be in the month of March which will start providing the CNG to 2.7 million vehicles in Punjab at 30% parity with petrol price as the GST on import of LNG to be used by CNG sector stands at just 5%. With provision of LNG to CNG sector 300,000 jobs will be ensured to people.