Thursday December 08, 2022

Proposal to supply gas to fertiliser, industrial sectors at market rates

October 18, 2022

ISLAMABAD: With ballooning gas sector’s circular debt that has crossed Rs1.5 trillion, the government should stop supplying re-gasified natural gas (RLNG) to fertiliser and industrial sectors at a low price as they are capable of paying the real rate, a parliamentary panel suggested on Monday.

The Senate’s Standing Committee on Petroleum was informed by Senator Muhammad Abdul Qadir that the circular debt of the gas sector had crossed Rs 1.547 trillion, while the government was providing RLNG of Rs4,000/MMBtu to fertiliser factories at Rs250/MMBtu.

Minister of State for Petroleum Musadik Malik replied that a poor man was given RLNG at Rs17/MMBtu, while it was sold at $1.35 to $3/MMBtu to fertiliser factories, and to export-oriented industries it was supplied at $9/MMBtu. “It is true that exports are very important, however, it is also a fact that the circular debt of the gas sector has reached Rs 1500bn,” he added.

Musadik Malik informed the committee that talks were underway with Turkmenistan for LNG purchase, adding that negotiations were also in process with Kazakhstan and Uzbekistan for energy purchase. “If an agreement is reached with Turkmenistan, the country’s energy problems will be solved,” he said.

The panel also deliberated on reforms to facilitate $3 billion proposed investment in an LNG terminal by Qatar Investment Company. The official informed the committee that the Economic Coordination Committee (ECC) of the cabinet had approved an amendment to the ‘LNG Policy’ for the establishment of new LNG terminals being developed by the private sector.

Through the amendment, the Third-Party-Access (TPA) was provided to new LNG terminals developed by the private sector without involving any government guarantees and off-take commitments will be on an optional basis on the negotiated tariff for a period of 20 years from the date of the commencement of construction. The official also added that the government had also submitted a proposal to the ECC to amend the OGRA Ordinance. A draft bill has been submitted to the Law Division for introduction in the parliament, he added.

Musadik Malik alleged that the government of Qatar had invited Pakistan to buy additional gas but the then Planning Minister Asad Umar being the chairman of the Cabinet Committee on Energy (CCoE) had refused to go for it saying that there was no demand for LNG.

Senator Fida Muhammad asked Malik to provide a copy of Asad Umar’s refusal of LNG purchase. The CEO of Pakistan LNG Limited (PLL) said that the government could have bought LNG when demand was finalized. It was further informed that deliveries of long-term contracts being made today would begin by 2026.

Senator Saifullah Abaro asked why did the government install LNG based expensive power plants? Malik replied that at the time when the plants were installed, there was no possibility of a hike in the LNG price.

The committee asked PLL why it had not bought LNG when it was cheap. The minister of state replied that by not signing a cheaper long-term LNG contract, the previous government had committed a criminal negligence.

The PLL CEO said, “We can buy LNG when there are final demand figures. Malik repeated the same allegation, to which Saifullah Abro said that he should not answer on behalf of government officials and let them reply.

Musadik Malik said that first decide whether a minister of state was allowed to sit in the meeting or not. There was a heated debate between Musadik Malik and Saifullah Abro. Abro said that when they were shown the mirror, they thought it was bad. He remarked that government officials did not let the ministers know the real issue. Mussadik Malik said that difficult questions must be asked in the committee but no one’s integrity should be questioned.

The committee was informed by the PLL official that this winter two additional LNG cargoes were being procured to meet high demand. The minister said that each month in January and February, one extra cargo would be imported. In January, 10 cargoes will be imported while in February nine cargoes will be produced, he added. He said that in comparison with the previous winter, this year 200 million cubic feet per day (mmcfd) of additional gas would be available. However, despite the availability of additional gas, consumers will face gas loadshedding, the minister added.

Discussing LNG spot purchase to face challenges in winter, the committee was informed that high prices remained a huge challenge to the purchase of spot LNG. Tendering and Pakistani LCs by foreign banks were other major issues the sector faced. Demand of natural gas has been increasing rapidly and the shortfall of indigenous gas during the winter is managed via the diversion of RLNG to the domestic sector and government-approved load management.

The tendering process must be made more stringent to ensure that the need of the common people is met. The committee was informed that the government is exploring various energy-sufficiency projects, especially with markets in Turkmenistan, Azerbaijan, and Kazakhstan. It was proposed that measures must be taken to ensure gas price regulation so that the market is not monopolised by the private sector.

Regarding the Uch compression project, the committee was informed that it was moving through the process of scrutiny and management approval. The project is of national importance and on an extremely tight timeline. It is expected that the project will be completed by November 2023.

Regarding the findings of the Prime Minister’s Inspection Commission (PIMC) about losses worth approximately $2 billion, the committee was informed that the Petroleum Division disagreed with many findings and points of the report. A detailed response from the ministry has been shared with the PMIC.