LNG import by private sector is in jeopardy?

Aftab Ahmed

Following a decision of the London Court of International Arbitration (LCIA), the LNG import by the private sector through third-party access is in jeopardy.

Sources told Newztodays.com that two separate arbitrations were filed in the London Court of International Arbitration (LCIA). One related to Liquidated Damages and the second was regarding the termination of the LNG Services agreement.

PGPCL had filed for consolidation of both actions in one case in the London Court of International Arbitration (LCIA). Pakistan LNG Terminal Limited (PLTL) argued against the consolidation of the two cases. However, LCIA has ruled against PLTL and consolidated the two ‘cases.

Now, Petroleum Division is unclear over the LNG import by the private sector through third-party access. Legal experts say that in light of the consolidation of the LNG terminal contract and liquidity damages cases in London Court, Third Party Access is in jeopardy.

Now, Petroleum Division is seeking clarity from the policymakers in government regarding Third-Party Access to private importers of LNG. Now, they are seeking advice on whether they should deny Third Party Access to LNG importers until the case is decided around in the next two years.

The second option is that government should treat TPA Independently and allow private import while reserving all rights under the termination case.

The idea of LNG import by the private sector was floated by petroleum advisor Dr. Asim Hussain during the PPP regime. The work started on third-party access rules mean to allow private parties to take pipeline capacity and market the imported product by using a pipeline of gas utilities-SNGPL and SSGC.

The first ship of LNG arrived in Pakistan in 2015 when the first LNG terminal was set up. However, the PML-N government had signed government to government LNG deal with Qatar and third-party access rules were put on hold by the PML-N government.

However, the present government of PTI had allowed the private sector in July 2019 to import LNG. But due to the monopoly of state companies and bureaucratic hurdles, not a single ship of LNG has been imported by the private sector so far despite the fact terminal capacity of the second LNG terminal has been lying idle and consumers had paid multi-million dollars on account of capacity payment.

Amid the Covid-19 recession, global LNG prices faced a slump and the private sector pressed the government to remove bureaucratic hurdles in the way of import of cheaper gas. The LNG import at cheaper rates could improve the basket price.

The Oil and Gas Regulatory Authority (Ogra) is notifying LNG prices on a monthly basis by taking the average price for three months.

The private sector had suggested that the government should immediately revise the LNG pricing formula by linking it with the monthly average price rather than the three-month average to reap the benefit of a gas price crash in the global market in the wake of a coronavirus pandemic.

Following the agreement with Qatar, the 90-day average of Brent crude today stands at $52 per barrel and 13.37% of that is the LNG price, which is $6.76 per million British thermal units (MMBtu). But private-sector claimed that it could bring importers at cheaper rates compared to LNG being imported from Qatar.

Now, new phenomena have been emerged due to the consolidation of LNG terminal cases in an international court of arbitration which may lead to further delay in the import of LNG by the private sector.