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December 8, 2017

Govt likely to allow private sector to supply RLNG


December 8, 2017

KARACHI: Government is mulling to authorise private sector to directly supply regasified liquefied natural gas (RLNG) to consumers as multiple suppliers can increase gas supplies nationwide, a document said.

“LNG supplies broadly require well-defined gas market, access to transportation and effective regulatory framework,” the draft of Third Party Access (TPA) rules 2017 said.

The draft, prepared by Oil and Gas Regulatory Authority (Ogra), proposed that private sector can import, sell and purchase imported LNG and supply it to the consumers on regulated prices. The private businesses will have access to transportation system to supply RLNG, it said.

TPA rules, which were introduced in 2012 to govern transmission and distribution of gas, suspended in April 2015. Currently, Sui Southern Gas Company (SSGC) is transporting RLNG through its pipeline networks to the power plants located in the Punjab.

“Multiple suppliers can provide more gas. Large consumers can ship for self-use,” the draft said. The document said the TPA rules would contain transport’s monopoly as consumers can choose from multiple sellers, while “transporters will be paid for unused capacity.”

Currently, Ogra is holding consultation sessions with all the stakeholders from across the country to discuss the draft of the new rules. The authority said local gas production is depleting, while gas shortfall currently stands at three billion cubic feet per day (bcfd) with demand of seven bcfd and is expected to reach four bcfd by 2020 if new inflows don’t come in.

Presently, government has two options to reduce the gas shortfall and replenish the reserves. Firstly, it imports gas under the Iran-Pakistan-India and Turkmenistan-Afghanistan-Pakistan-India projects. But, there is a host of challenges and a long gestational period involved in the projects. Secondly, there is an option of LNG imports, which government is already utilising, but the inflows need to be increased. The country has two LNG regasification terminals with a total capacity of 1.2 billion bcfd. More than one billion cubic feet per day will be added into the system after the establishment of more LNG terminals expected next year.

LNG gas cost will shrink to $3.7 per million metric British thermal unit (mmBtu) under the weighted-average cost of gas proposed in the new TPA rules as against the existing seven dollar per mmBtu. SSGC and Sui Northern Gas Pipelines Limited (SNGPL) expressed objection over the new tariffs proposal, saying it would bite their profitability. SSGC expects a revenue impact of one billion rupees a year, while SNGPL fears a loss of four billion rupees in revenue as a result of the tariffs revision.

“Both the gas utilities claimed that the government assured them that their return will not go down as a result of these reforms,” analyst Afaq Nathani at Insight Securities, who attended a public session in Karachi, said. “However, Ogra maintained that this guarantee is not forever and the decision will be taken after the relevant consultations.”

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