Monday March 20, 2023

11 LNG cargoes of Rs110bn to be diverted to domestic sector

December 15, 2022

ISLAMABAD: The Petroleum Division’s mandarins have estimated that about 9-11 costly LNG cargoes worth Rs110 billion will be diverted to domestic consumers in the peak winter season to ensure gas availability for eight hours.

“We have asked the Finance Ministry to provide Rs105 billion for diversion of RLNG to domestic consumers, but the financial managers are hesitant to do so. They feel the IMF may not allow the government to provide this huge subsidy to domestic consumers. So far, two meetings held with officials of the Finance Ministry ended up without a decision,” one of the top Energy Ministry officials told The News.

The government started diverting up to 100 mmcfd of RLNG to domestic consumers in November 2022 and increased that to 250-300 mmcfd in December. “We expect to inject over 400 mmcfd RLNG in January 2023 due to peak winter conditions.”

Against this backdrop, the prime minister is being sensitised over the critical demand and reservations of the Finance Ministry viz-a-viz the IMF guidelines, the source said. “We have also prepared a presentation on the current gas availability and deficit with load management to brief the prime minister.”

Following PM’s decision, it would be sent to the ECC for formal approval. For this purpose, the Petroleum Division would move a summary in the ECC. In the last four winters, RLNG amounting to Rs108 billion was injected into the domestic sector and that amount has not so far been recovered. “Currently, the sale price of natural gas stands at Rs450 per MMBTU whereas the RLNG cost is at $13 per MMBTU (Rs3,100). The Petroleum Division wants the differential to be paid by consumers through revenue requirements of gas utilities.”

Under the amended act, RLNG is no longer a form of petroleum product but has been renamed a gas whose cost can now be recovered from domestic consumers. In case the amount is not paid, then the gas sector, which is already soaked in the circular debt of Rs1,500 billion, will have another liability of Rs110 billion and this will make the sector further unsustainable. “Now the government has started supplying gas to commercial consumers at the RLNG price who have managed to get a stay order from courts.” The gas deficit has been worked out at 900-1,000 mmcfd in the SNGPL system that covers Punjab and KPK. The gas availability in the SNGPL system would remain in the range of 1,520 mmcfd (770 mmcfd of local gas plus 750 mmcfd of RLNG) against the demand of 2,100-2,500 mmcfd. The gas consumers in SNGPL stand at 7.5 million (6.5 million in Punjab and 1 million in KPK). Likewise, the gas availability in Sui Southern (SSGCL) system would be in the range of 925-1,000 mmcfd against the demand of 1,250-1,500 mmcfd. The overall gas deficit in the SSGC system has been estimated in the range of 250-350 mmcfd. No gas supply is being provided to the CNG, fertilizer, cement and non-export industries in Punjab and KPK. Similarly, gas supply to captive power plants of export sectors would also be shut down if winter becomes more severe, maybe somewhere between December 15 and January 31. Currently, the captive power plants are being provided 50 per cent gas supply. But the textile sector would continue to get 40-42 mmcfd gas.

The government is providing electricity at Rs19.99 per unit, which is why the it would stop gas supply to captive power plants. The power sector is currently being provided 165 mmcfd of gas, which would be halved during the peak winter.