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November 26, 2020

Deeper gas crisis on the cards

Top Story

November 26, 2020

ISLAMABAD: With the winter season aggravating every day, the country is heading towards a severe gas crisis as 100pc state owned companies -- Pakistan LNG Terminal Limited (PLTL) and Pakistan LNG Limited (PLL) have refused to finalize the Inter-User Agreement (IUA) making the private LNG imports impossible knowing the fact that the private sector alone can solve the gas crisis and solve it fast by utilizing the unused capacity of the government and 150 mmcfd additional capacity of PGPCL terminal.

“More importantly, PLTL has rather sought a mammoth amount of $18 million per annum as compensation from the Pakistan Gas Port Company (PGPC) simply for the right to allow the PGPC terminal to bring in private sector LNG imports,” top officials privy to the development told The News.

The PGPCL has contracted with PLTL for only 600 mmcfd and beyond that is the private excess capacity, which the PGP is committed to utilize to bring cheaper LNG cargoes than at the prevailing notified OGRA price. However, the red tapism in state owned companies is hampering the way for the PGP Terminal to become a multi-user terminal, which is a practice globally at LNG import terminals where borrowing and lending of molecules is as per standard international agreements.

The GHPL and PLL management did not deny the development that the PLL and PLTL have refused to finalize the IUA when it was asked about it. Rather the management says PLL has already floated the advertisement for use of PLL’s idle terminal capacity by private sector, in line with the decision of the ECC and cabinet. The terms and conditions of inter-user agreement are available on PLL’s website.

To another question if PLTL and PLL have come up with some terms and conditions making private sector LNG imports impossible, the management says that all terms and conditions set out by the PLL are in accordance with the international practices and the draft TPA Rules and Code (being finalized by OGRA and the World Bank, in consultation with the relevant stakeholders from public and private sectors).

When asked if PLTL is seeking $18 million per annum as compensation from PGPC simply for the right to allow the PGPC terminal to bring in private sector LNG imports and what is the rationale of this demand which will be tantamount to thwarting the efforts of the government to ease the burden of general public by bringing in cheaper LNG and making it available in the required volumes, the management says a high-level committee constituted by the cabinet (of three federal secretaries and deputy chairman Planning Commission) is working to finalize the compensation for use of terminal capacity by private parties and will provide its recommendations to the ECC/cabinet for consideration/approval. Any compensation received in this regard will be passed on to Pakistani public (i.e. end-consumers of RLNG).

However, this scribe was told that the decision will be looked into and sanity will prevail and final decision will be taken in supreme interest of the country, as PLL officials are in talks with private companies that intend to import LNG. However, as per the officials, as of today the government is importing LNG through PGPCL terminal 510 mmcfd gas against its 600 mmcfd guaranteed capacity. In late September 2020, the government in line with third party access (TPA) rules approved by the ECC, decided to offload to private sector some of its capacity of 600 mmcfd supported by severing guarantees on PGPCL terminal.

The decision was taken up with the aim to do away with the monopoly of both gas companies – SSGC and SNGPL. And under the decision the private sector will share the burden of PLL in terms of payment of capacity charges to the terminal. And, in return, the private sector will import LNG on its own and provide cheaper RLNG to its consumers. The PLL issued to this effect an advertisement seeking interest from the interested parties to import 150 mmcfd LNG in October 2020, 200 mmcfd in November 2020, 200 mmfd in February 2020 and 150 mmcfd in March 2021. But now under the new scenario, the PLL took a U turn and refused to ink the IUA, knowing that the government projections are that the gap this winter would be 150-250 mmscfd in the SSGC system and 500-750 mmscfd in the SNGPL system.

The top sources told The News that in the Negotiation Committee meetings, PLTL and PLL have refused to finalize the Inter-User Agreement (IUA) and, in the Negotiation Committee meetings and otherwise, have put forward terms that make private sector imports impossible.

The decision of the federal cabinet notwithstanding, the effort of PLTL and PLL, it appears, is to thwart the efforts of the government to ease the burden of the general public by bringing in cheaper LNG and making it available in the required volumes.

The PGPL Terminal has additional capacity to re-gasify the LNG of 150 mmcfd, which cannot be used unless and until PLL and PLTL ink Inter-User Agreement. More importantly, the private companies cannot utilize the unutilized capacity of the government in the PGPCL Terminal in the absence of IUA.

The officials said that both the state-owned gas companies -- SSGC and SNGPL -- continue to resist providing the private sector access to their pipeline systems, contrary to the national interest and their own financial interest. The gas utilities are opposing the third party access (TPA) rules, which the federal government approved six months ago. “SSGC and SNGPL are opposing the private LNG import fearing their consumers will get out of their ambit and join the LNG importers for cheaper gas.”

The officials said that OGRA lacks the expertise and authority to put everyone in one room and hammer out sustainable decisions on all regulatory issues.

They said that the Planning Commission has been holding sessions regarding compensation to be paid by the PGPC to PLTL and by the Engro Terminal to SSGC since July 2020 with no outcome so far and is largely influenced by the Petroleum Division, PLL, and PLTL.

Independent LNG experts are of the view that the Planning Commission should inform the cabinet that due to resistance from within state enterprises, it is unable to make any recommendations. It should request the cabinet for the formation of a new committee comprising the Finance Adviser, SAPM on Petroleum, Deputy Chairman of the Planning Commission, MD SSGC, MD SNGPL, CEO PGPC, CEO of the Engro Terminal, and the Senior Member OGRA (in the absence of the chairman), and this committee should be tasked with the responsibility to remove all obstacles in the way of private sector imports, draft and approve a standard Inter-User Agreement.

They said that the committee should also draft and approve a Third Party Access agreement, as a standalone document and set the parameters of compensation to be given by the private sector to PLTL or SSGC, as the case may be, so that there is top level support and no intervention is made in the process.