Industry steams as OGRA ups provisional rates for RLNG

LAHORE: The ongoing upward trend in the global spot market of liquefied natural gas has left Pakistan’s downstream industry jittery, primarily due to Oil and Gas Regulatory Authority’s (OGRA) provisional price increase for RLNG, which disregards Pakistan State Oil (PSO) decision to scrap expensive deals.

The notification by OGRA regarding high pricing of RLNG for August 2021 on provisional basis was being termed a routine practice, but it created confusion and triggered the process of passing on the financial burden of costly imported gas to consumers.

LNG import managers seem to have a communication gap, which is typical in many public sector enterprises. The fallout of abnormally high energy cost has made it necessary for the regulator to pass on its negative impact to the consumers.

It may be noted that a month ago, The News forewarned about the imminent trend of high LNG prices in the global market.

Consequently, the compressed natural gas (CNG) industry on Tuesday announced that CNG price would likely be increased in Punjab by up to Rs5/litre and for Sindh up to Rs8/kg for the month of August.

As a result, many CNG filling stations started charging the new rates.

Market insiders have expressed astonishment at OGRA’s pronouncement to increase rates based on high import prices, when PSO has already scrapped the expensive deal on July 27, 2021.

After much hue and cry, PSO made it clear that the state-owned company has not awarded cargo at $20.055. The bid received against the required delivery of August 29 and 30, 2021 was high, resulting in a price which was not acceptable to PSO and the tender was scrapped on July 27, 2021. PSO has retendered for the same delivery period on July 29, 2021.

Market insiders said our system does not work on exceptions and fails when an extraordinary event occurs, as it continues to work on status quo like an instructed robot. They said it was a lack of clarity on part of the regulator, despite a lapse of five days since PSO’s decision.

Market insiders feel that the pain and efforts of the team burning the midnight oil to optimise import of LNG to meet industrial and power demands was vaporised amid inaction by the enforcer. Regarding lessons learnt from this fiasco for the country's energy establishment, they were of the view that OGRA should have immediately corrected the provisional determination in order to offset its impact within hours instead of days.

They called for the PSO and Energy Ministry to use this incident as a learning opportunity instead of embarking on a witch hunt.

To shield against the soaring LNG spot price, PSO announced that it has entered into a new long-term supply contract with Qatar Petroleum (QP). Supplies under this agreement would start in January 2022.

This welcome development would further reduce the basket price of imported LNG. Considering the higher demand in the upcoming winter season, PSO has exercised the option in the new LT contract for bringing four additional cargoes in November and December this year at the new contractual prices, which were expected to be much lower than the market price during winter.

PSO’s forward thinking approach has been appreciated, as they were able to convince Qatar Petroleum to deliver four cargoes prior to the commencement of the new deal at the ensuing contract price. “It is indeed a significant accomplishment in a period where current predictions are of pricing going beyond 20-25 percent of Brent Price,” market insiders said.

PSO reiterated that its approach to secure LT LNG deals has been in line with the ongoing practice in the region. Neighbouring countries like India and Bangladesh also signed long-term agreements for LNG supply because they provide security of product and facilitate in maintaining a smooth supply chain for local requirements.

On the same lines, Bangladesh this week sealed a LNG deal with US. The proposed Commonwealth LNG project in Louisiana signed a 1 MTPA supply deal with buyers from Bangladesh. Bangladesh is said to be a growing import market since LNG imports began in 2018 and expected to import 30mtpa by 2041.