UGDC Pakistan, KE to become first LNG importers
Aftab Ahmed
Islamabad: UGDC has been trying to import LNG in Pakistan to provide retail outlets due to price difference between CNG and petrol.
The government has allowed UGDC Pakistan to import LNG. However, bureaucratic hurdles are still making it unable to import LNG in Pakistan.
UGDC Pakistan and K-Electric (KE) are going to emerge first importers of LNG in Pakistan following the decision of the government allowing terminal operator to allocate capacity to private sector. It will not only provide LNG to KE but it would also provide to retail outlets despite a low difference between price of CNG and petrol.
UGDC Pakistan has been trying to import LNG to utilize in retail outlets as there has been still reasonable difference in CNG price and petrol.
The CNG sector had formed a company UGDC Pakistan and obtained a licence from Oil and Gas Regulatory Authority (OGRA) in 2016 for import and sale of Liquified Natural Gas (LNG) in Pakistan. The economic coordination committee (ECC) had recently allowed LNG terminal operator to allocate capacity to private sector. Private sector has been making efforts to import LNG for last few years but it has not been successful.
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, UGDC Pakistan 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 to UGDC Pakistan would reduce risk for the government. It will also cut losses of the state run utilities. 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 capacity of 600 mmcfd at any time. Government will treat any sale to private party 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 Pakistan 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.
