PSO to face $150,000 demurrages in current month

ISLAMABAD: In the wake of continuous default by Sui Northern Gas Pipelines Limited (SNGPL) against the committed off-take of LNG, the state owned Pakistan State Oil (PSO) has landed into the financial lurch as it is going to face the demurrages amounting to $150000 in the ongoing month of August alone.

The state owned oil marketing company in its letter to Petroleum Division written on August 2, 2019 has warned the government of the ugly situation saying that in case the corrective measures are not taken on time the demurrages would escalate resulting in the cost of LNG in the country as the demurrages cost becomes the part of the cost of delivered RLNG.

The PSO letter written by Kashif Siddiqui, General Manager Commercial Fuels to Additional Secretary of Petroleum Division copy of which is available with The News also unfolds another fear saying the cargo arriving on 15-16 August might attract Take or Pay charges as well which means the whole cargoes value of around $30 million will be to the buyer’s account without even receiving the LNG.

The letter mentions saying that it is rather unfortunate that instead of improvement in the re-gasification pace, the situation is getting out of control. Now in terms of delays in cargoes unloading resulting huge expected demurrages on all incoming cargoes as of now the terminal-1 is running at 540 mmcf and would further go down against planned 600 mmcf or may be more to recuperate the earlier loss capacity.

When contacted, Petroleum Division’s spokesman responded saying that the usage of RLNG in power sector purely depends upon demand of electricity in the country depends upon the fluctuations of weather. In the wake of monsoon rains the demand of electricity has reduced which is why the off-take of RLNG by power sector has also tumbled. The only solution to the whole problems is building of RLNG storages which are very costly. However, pipeline is the RLNG storage which is very dangerous as at times the gas pressure gets increased in the pipeline which may lead to catastrophic disaster.

As a result of continuous default by SNGPL against the committed off-takes, the cargo to be berthed is anticipated to incur heavy demurrages as the expected discharge rate owing to lesser available ullage with FSRU will be maintained @2800 cm/hour, which is 1/4th of the normal discharge rate. The delays in cargo’s unloading will have cascading effect on future deliveries as well an now all cargoes in the month of August 2019 or expected to incur heavy demurrages which are estimated to be well above $150,000 as of now, if the re-gasification pace rates are not increased immediately. It is anticipated that if immediate corrective measures are not employed by SNGPL the cargo arriving on 15-16 August might attract Take or Pay charges as well which means the whole cargoes value of around $30 million will be to the buyer’s account without even receiving the product. This warrants immediate remedial measures to be taken in coordination with Power Division and SNGPL, as the situation is developed due to lesser off-take by Power Division than the committed one.

In the meantime SNGPL needs, the letter says, to take all possible measures on war-footing basis, including diverting gas to other sectors or reduction/temporary suspension in local supplies so that the huge cost implications are averted that would inflict loss to national exchequer.