Sunday July 03, 2022

To avert gas crisis in winter season: Govt seeks to utilise additional capacity of both LNG terminals

August 10, 2021
To avert gas crisis in winter season: Govt seeks to utilise additional capacity of both LNG terminals

ISLAMABAD: The government has intensified its endeavors to utilise the spare capacity of 330mmcfd available in both FSRUs berthed at LNG terminals of Engro and Pakistan Gas Port Consortium Limited (PGPL) to reduce the intensity of gas crisis in the forthcoming winter season.

In the Petroleum Division, two separate crucial meetings with representatives of Engro and PGPL LNG Terminal were held on Monday. Secretary Petroleum Division Dr Arshad Mehmood led the government side. The officials from Sui Southern, Pakistan LNG Limited and Oil and Gas Regulatory Authority were also present in the meeting, a senior official who was part of the meetings told The News.

The dry docking of FSRU Exquisite of Engro LNG Terminal that left Pakistan waters on June 28-29 will end by August 30. The decision to retain the existing FSRU Sequoia by the government has to be taken and a new agreement before August 30 is very important. And in case the government fails to retain the existing FSRU at the LNG terminal by September, then its old FSRU will replace the new one. The new FSRU has the capacity to degasify RLNG up to 780mmfd while the old one has 660mmcfd.

The government side, headed by secretary petroleum, assured the Engro Company that it will try its best to retain the new FSRU having capacity of 780mmcfd before August 30, 2021 with the hope that the system will expedite the process. The secretary also assured that he will try his best to manage the required approval before August 30 for retaining the new FSRU.

The government wants to acquire the additional capacity of 150-180mmcfd of the FSRU Sequoia with take or pay model in case it is retained. The decision to reduce the regasification fee of additional capacity will be taken in later meetings.

However, in another meeting with PGPCL, having FSRU’s additional capacity of 150mmcfd, Pakistan LNG Limited (PLL) said it wanted to acquire its additional capacity. Interestingly, PGPCL has refused to sell its additional capacity of 150mmcfd to the government, saying it wants to utilize its additional capacity on a private to private business model. PGPL also argued that it wants to establish the private to private model in the country for other LNG terminals, which will be established on a private to private business model.

Secretary Petroleum Dr Arshad Mehmood and OGRA representatives were very happy over the arguments of the PGPL representatives. However, Pakistan LNG Limited (PLL) opposed the PGPCL contention and underscored the purchase of its additional capacity. PGPCL in the meeting said that in case its LNG vessel is berthed and meanwhile PLL brings its LNG vessel, then the company will remove its vessel to accommodate the PLL vessel and more importantly in this case PGPCL will give indemnity to PLL.

Most of the time, the PLL’s acquired capacity of 600mmcfd remains underutilized and if a private party under third party access rules utilizes it, it will not only reduce the financial burden of PLL, but the private party will also arrange the LNG vessel at lower prices. Private parties are not bound to procure the LNG under PPRA rules. So in the meeting it was decided that PGPCL and PLL in the presence of OGRA representatives will sit down soon and narrow down their differences on berthing of vessels and storage issues.

When contacted, secretary petroleum said, “The government wants to utilize the additional capacity of both LNG terminals keeping in view the local gas availability that has tumbled to 2.8 billion cubic feet and maximum capacity to import LNG of 1.2 bcfd. So the total gas the country can have stands at 4 bcfd, but when winter comes, the demand goes up to 5 bcfd or close to it. So the government for practical purposes wants to utilize the additional capacity of both LNG terminals without violation of the laws. We will make the case for acquiring the additional capacities of both the terminals before the top decision makers and will also seek go ahead from NAB to this effect.”

He said that in the winter season, LNG is diverted to the domestic sector, which is why gas supply is disconnected to non-export industries (3,500 industrial units), fertilizer and CNG sector. He said that the CCOE, on the directives of the prime minister, had asked to utilize the additional capacity available in LNG terminals to reduce the intensity of gas crisis in the winter season. At that time, Engro had an additional capacity of 60mmcfd and PGPCL 150mmcfd. Under the new scenario, Engro has managed a new FSRU Sequoia of 780mmcfd, having additional capacity of 180mmcfd after it sent its old FSRU for dry docking. So both terminals have 330mmcfd spare capacity and the government wants to utilize it and to this effect, we held the meetings.”

To a question, the secretary said: “There should be a watchdog like NAB to catch any wrongdoing and officials should be careful but should not have any fear while taking decision.” He stressed that the government institutions involved in the LNG supply system need to be careful but at the same time they should take bold decisions based on rationale being within the law.

To a question, he said the government will procure the additional capacity with no guarantee. He said that he had held three meetings with regard to contractual, commercial and legal due diligence with the LNG terminal companies. “We will have to determine how NAB investigation against increasing the regasification of LNG from 400 to 600mmcfd affects the decision to retain Engro’s new FSRU and procure its additional capacity, being within the law.” He said that the federal cabinet and ECC had already approved the third party access rules and more importantly OGRA has also cleared third party access rules and the government wants to implement them, so that the private sector can import LNG and sell to private parties.