ISLAMABAD: In a major move, the government has in principle allowed Rs450 billion worth CNG sector to import over 600 mmcfd of LNG that will ensure round-the-clock supply of gas to the CNG stations in the Punjab.
This means the CNG sector will emerge as the largest LNG importer in the years to come. According to a government official, the CNG industry was hopeful of importing the LNG by March 31, 2015 replacing the local CNG. And the local gas currently being used by the CNG sector will be surrendered to the government that will use it either for the industrial sector or for power generation.
If the government opts to use the local gas surrendered by the CNG sector for power generation, then it would immediately be in a position to generate 1,600MW of electricity. The official said the LNG price would be de-regulated and it would be sold in litres and not in kilograms. The government or Ogra will have no role in fixing the price. The CNG sector will regulate the price on its own and maintain it at 30-35 percent parity with petrol.
Federal Minister Shahid Khaqan Abbasi, while talking to The News, confirmed that the Economic Coordination Committee (ECC), which met here on Thursday with Finance Minister Senator Ishaq Dar in the chair, has approved the project allowing the CNG sector to import the LNG that will be turned into gas at the LNG terminal and will be injected into the gas distribution system of gas utilities (Sui Southern and Sui Northern).
When asked if the ECC had extended the required fiscal incentives to the CNG industry by giving the waiver of GST on the import of LNG to maintain the 30-35 percent parity between the prices of petrol and CNG, the minister said that a committee had been formed under the chairmanship of FBR chairman comprising secretary finance and secretary petroleum and natural resources with the mandate to calculate the fiscal and financial impact of the proposal and to work out an acceptable plan to maintain the parity and present it to the next ECC meeting.
The Ministry of Petroleum and Natural Resources has moved the summary seeking tax exemptions with the argument that the revenue of the state will not be affected if LNG to be imported for the CNG sector is exempted from the taxes.
The ministry told the ECC meeting that the state will continue to get the revenue after the local natural gas being utilised by the CNG sector gets diverted to the power and fertiliser sectors. In addition, it is estimated that almost $1.5 billion per annum will be saved on the oil import bill by providing LNG to the CNG sector. The official said the CNG sector was going to ink a deal with Engro LNG terminal to import 200mmcfd LNG and 400mmcfd through other terminals being installed by other players under private arrangements. The Engro LNG terminal has a capacity to handle the import of 690mmcfd gas out of which the government wants to import 400mmcfd LNG while the remaining 200mmcfd will be imported by the CNG sector.
The official said in a bid to bail out the government from the energy crisis, the CNG sector had carved out a plan to import 600mmcfd LNG in phases through foreign suppliers under the LNG policy 2011.
Under the plan, this sector has made a Special Purpose Vehicle (SPV) with the name of Universal Gas Distribution Company Private Limited (UGDC). The UGDC will handle all the commercial agreements with gas utilities like the Sui Southern and Sui Northern and LNG suppliers and LNG terminal operators to secure a long-term agreement for LNG supply arrangements.
The UGDC will further be responsible for the entire project management and to handle the LNG distribution system, thereby, sparing the pipeline capacity in future for use by the gas utility companies.
The UGDC will need to get the gas marketing and distribution licence from Ogra and a price deregulation policy. The plan mentions that the Punjab CNG stations will require 150mmcfd gas during the first phase against the bulk sale gas agreement to be inked between the UGDC and Sui Northern for an interim period of 18-20 months, starting from the grant of distribution licence to the UGDC till the projected supply through imported LNG is successfully commissioned.
In the second phase, the CNG industry will import 200mmcfd LNG and distribute it to the CNG stations through the network of gas utility companies for 18-24 months until such time that the LNG terminal becomes operational.
The initial imported volume of 200mmcfdg gas will gradually be enhanced to 400mmcfd or as per the requirements of the CNG market in the whole country. In the third and the final phase, after three or three-and-a-half years, the UGDC will continue to import LNG and off hook itself from the Sui utility companies pipeline network. It will build its own storage and distribution network of supply.
Meanwhile, the All Pakistan CNG Association (APCNGA) has said Prime Minister Muhammad Nawaz Sharif has fulfilled his promise by allowing LNG for the CNG sector in the Punjab. The Economic Coordination Council has formally approved the supply of LNG to the CNG stations in the Punjab which will help them run seven days a week, said Ghiyas Abdullah Paracha, the leader of the APCNGA.
He said the decision will ensure jobs for 400,000 people, help 2.5 million owners of CNG converted vehicles to save time and money, reduce fares, oil import bill and pollution, he added.They said that CNG stations throughout Punjab would become operational soon while the CNG outlets in Sindh, Balochistan and Khyber-Pakhtunkhwa would continue to get the locally produced natural gas according to the Article 158 of the Constitution.
Ghiyas Paracha said that import of natural gas from friendly countries was not possible due to international pressure and other considerations, therefore, LNG has emerged as the only option to bridge the gap between demand and supply. He said that LNG would be 30 to 35 percent cheaper than petrol.
When asked as to what had happened to the proposal of the Ministry of Petroleum and Natural Resources to regulate theliquefied petroleum gas (LPG), the minister told The News that the issue will now be taken up at the Council of Common Interests (CCI). The government wants to fix the LPG prices in the range of Rs90 to Rs130 per kg, at Rs84.6 in a bid to provide relief to consumers.
According to the official press release, the ECC was informed that Pakistan’s year-on-year inflation (CPI) was registered at 7% in August 2014, the wholesale Price Index remained at 3.3% whereas the Sensitive Price Index was 5.2% as per the figures provided by the Pakistan Bureau of Statistics.
The ECC was further informed that the workers remittances during the month of July-August 2014-15 were $2.97 bn as compared to $2.64 bn in the same period last year, showing an increase of 12.5%. Revenue collection by the FBR during July and August 2014 was Rs319 billion, a 14.33% increase from the corresponding period last year. Large-scale manufacturing recorded growth of 4.6% in August 2014 as compared to the same month last year.
The ECC was also informed that the prices of onions, potatoes, petrol, kerosene oil, garlic, high speed diesel, pulse moong, pulse masoor, vegetable ghee, wheat, tomatoes and red chili powder had decreased in the month of August. The prices of rice basmati broken, rice irri-6, Nido, mustard oil, cooking oil tin, vegetable ghee tin, salt and pulse mash had remained unchanged during the month of August.
The ECC was also informed that the country has enough stock of wheat (6.916 million tons) and sugar (2.088 million tons) as per the latest figures of September 2014. It was also informed that the country had been producing 15,207MW of electricity as per the figures of July 2014. The stock exchange had been robust and since May 2013 had registered 42.9% growth in rupee terms and 37.8% growth in US dollar terms, according to the figures provided by the KSE.
On a summary moved by the Ministry of Textile Industry for priority in gas and electricity load management, the finance minister has directed the secretary textile industry and secretary petroleum to discuss the issue mutually and decide further details, subject to the availability of gas for the export-oriented sector.
On a summary moved by the Ministry of Petroleum and Natural Resources for Liquefied Petroleum Gas Production and Distribution Policy 2014, the ECC advised to submit the summary at its right forum under Article 154, which is the CCI, for seeking decision.
The chair advised all the representatives of ministries to discuss the issues on which they had opposing views first among themselves and then come to the ECC only for final endorsement of a well-prepared proposal.