Sun. Aug 18th, 2019

UGDC and KE to become first LNG importers in private sector

Aftab Ahmed

Islamabad:Universal Gas Distribution Company (UGDC) and K-Electric (KE) are going to emerge first LNG importers in private sector following the decision of the government allowing LNG terminal operator to allocate capacity to private sector.

The CNG sector had formed a company UGDC and obtained a licence from Oil and Gas Regulatory Authority (OGRA) in 2016 for import and sale of Liquified Natural Gas (LNG).The economic coordination committee (ECC) had recently allowed LNG terminal operator to allocate capacity to private sector.

There are two LNG terminals in Pakistan. First LNG terminal by Engro group has 690 mmcfd capacity whereas the second LNG terminal owned by Pakistan Gas Port Limited (PGPL) has 750 mmcfd capacity. The government has dedicated capacity of 600 mmcfd whereas it has additional idle capacity of 150 mmcfd.

After a decision of the government to allocate additional capacity to private sector would result in utilizing full capacity of terminal. So, with the utilization of the full capacity, private sector would bring additional import of LNG to the country. It would also result in bringing capacity charges down further, an official told Newztodays.com.

LNG consumers have already paid an additional $45 million in 2018 due to unutilised capacity of LNG terminals and that were estimates that consumers would bear an extra cost of $40 million in the ongoing year if full contractual capacity of terminal is not used.

Officials said that decision of the government to allocate additional capacity of terminal would reduce risk for the government and losses of the state run utilities would also be slashed. Officials said that there would be no government guarantee involved in this regard and investment in private sector would witness a rise.

However, the decision has certain conditions for the private sector to avail the LNG terminal capacity.If government is not fully utilizing its contracted capacity of 600 mmcfd at any time, any sale to private party will first be treated as sale of government of Pakistan capacity to reduce government ‘take or pay’ up to 600 mmcfd I. e terminal cannot resell capacity twice.

Any customer like UGDC and KE that chooses to buy from private importers will have to give undertaking to SNGPL and SSGC that it will give up its entitlement to take supplies from them. If a terminal brings bigger FRSU, it cannot disrupt services to government of Pakistan and there will be no new tax concessions for this.

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