Circular debt creeps up on LNG

Hidden from sight

LAHORE: After crippling the power sector, the tentacles of infamous circular debt have appeared in the liquefied natural gas (LNG) sector due to some unsettled issues, mainly by public sector departments, although the government has come up with a solution lately to deal with all such issues under a newly formed Pak LNG Company.

According to versions of various stakeholders, it is estimated that the LNG sector circular debt stands at Rs3.5 billion currently. Users of re-gasified liquefied natural gas (RLNG) owe over a billion to Pakistan State Oil (PSO), while Sui Northern Gas Pipelines Ltd (SNGPL) have to pay over Rs2.5 billion to CNG dealers alone. One of the main reasons of obstacles in money circulation among various energy sector departments and private companies has been difference of opinion on various issues.

Sources feared that the amount of the circular debt could increase significantly if immediate actions were not taken to address the situation.

Shahid Khaqan Abbasi, Federal Minister for Petroleum and Natural Resources, said he was aware of the situation, and claimed that several issues in this regard had already resolved. The RLNG customers, owe some money to the SNGPL due to non-declaration of tariff by Oil and Gas Regulatory Authority (OGRA), he said. “The Economic Coordination Committee (ECC) of the Cabinet issued directives on the outstanding issues so now this should be resolved,” he added.

However, CNG dealers claimed that they were subjected to average bills. As per their calculations, they have paid 2.5 billion additionally to the gas utility. “We are being subjected to estimated bills of RLNG supply,” said a CNG dealer. He added that the price of LNG, communicated only through monthly bills, was causing inconvenience for them.

Contrary to this claim, Petroleum Minister said that the CNG dealers settled the losses with SNGPL in dollar terms. Subsequently, he added, not a single extra dollar was charged.

On the other hand, private companies using RLNG have stressed the need to ensure fair billing to consumers. They also termed arbitrary calculation of Unaccounted for Gas (UFG) another reason leading to incorrect billing of RLNG to consumers. Both the SNGPL and OGRA differed over formula of calculating UFG. Price fluctuation on arrival of every consignment should be announced publically and in advance, they stressed.

Stakeholders also highlighted difference of opinion between OGRA and PSO tariff of RLNG.

Ghiyas Abdullah Paracha, Group Leader of All Pakistan CNG Association, was of the view that LNG trade should be liberalised in letter and spirit. He said that several administrative issues needed to be resolved with close coordination of regulator and other public sector departments.

Acknowledging that the Ministry of Petroleum succeeded in overcoming major issues in the import of LNG, Paracha, who is also running an LNG import company, Universal Gas Distribution Company (Pvt) Ltd, said that the role of third party should be strengthened to straighten out the issues pertaining to the imports and distribution. Referring to the example of the fertiliser sector, he said, it was a case study as to how the import of LNG could be made possible in the shortest possible time, bringing relief to the whole industry.

“We should follow this model to enable the private sector for fully facilitating the import of LNG,” he added.

Meanwhile, Sheikh Imranul Haq, CEO, PSO, said the Ministry of Petroleum and Natural Resources was responsible for allocation of RLNG, and PSO was only given responsibility of import. He said that CNG sector owes PSO Rs1 billion approximately.

It may be noted that in an effort to bridge the widening natural gas demand-supply gap of the country, Pakistan achieved a milestone by setting up import infrastructure for LNG in 2015. During July to Feb FY 2016, 175mmcfd volume of RLNG was imported.

Despite setting up of required infrastructure, there are still several teething issues that need to be resolved. Owing to such obstacles, smooth import and distribution of RLNG is still not a reality.