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July 23, 2019

Pakistan grants 10-year licence to Trafigura for RLNG sale

Islamabad

July 23, 2019

Islamabad : Pakistan has granted a 10-year licence to an international independent energy and commodity trading company Trafigura Pakistan for import of natural gas/re-gasified liquefied natural gas (RLNG) and its sale to consumers in the country.

This is the country’s first licence in private sector for LNG import aimed at improving availability of gas to different industries and also optimal utilisation of LNG terminal. The investors in LNG sector see great potential for private sector LNG imports. This development would send a strong signal to investors and they would start investing in the sector.

A senior official of the Oil and Gas Regulatory Authority (Ogra) told The News that once the Geneva-headquartered Trafigura starts its operations, it would also help support the struggling state-run Sui Southern Gas Company (SSGC) in increasing its revenue and boosting its financial health, as the licensee (Trafigura) would also pay to SSGC the annual gas transportation charges in billions of rupees.

As the government has also decided to increase LNG import by 400 mmcfd by December 2019, more LNG import would also improve the balance sheets of these public gas companies by getting more charges for gas transportation.

Official said that of 400 mmcfd proposed addition to LNG import, in June 2019, the government has floated a tender for 200 mmcfd for which among other companies Trafigura is also a contestant to win the bid. The bid is to be opened and awarded in a few days, the official said.

Currently, two LNG terminals are re-gasifying over 1,100 mmcfd LNG, of which the power sector is getting 790 mmcfd and fertiliser industry 180 mmcfd. The second terminal has 790 mmcfd LNG handling capacity and the government has dedicated capacity of 600 mmcfd.

At present, the PSO is importing 600 mmcfd LNG from Qatar. However, Pakistan LNG Limited (PLL) has short and long-term contracts of 200 mmcfd LNG imports whereas the remaining 400 mmcfd LNG is being secured through spot purchases.

It is worth mentioning that during 2018, the second LNG terminal did not operate at full capacity, while the government had paid millions of dollars to it as idle capacity charges which ultimately the consumers are paying.

Besides paying the transportation charges to SSGC, the licensee shall pay the annual fee of 0.25 percent of its annual turnover from sale of gas in respect of the most recent completed financial year to the regulator. The company shall charge RLNG price in accordance with the policy guidelines issued from time to time by the federal government.

In June 2018, Pakistan Gasport Consortium Limited (PGPLC) terminal has granted all of its spare capacity to Trafigura for import of LNG and sale of RLNG from the terminal. Trafigura several years ago invested in this second re-gas terminal in Pakistan as minority shareholder.