Fee payment row impedes start of operations at second LNG terminal

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ISLAMABAD: As fee payment row rages on between Fatima Fertilizer and Sui Southern Gas Company (SSGC), Pakistan LNG Terminal Limited is mulling the option of diverting gas imports from Qatar to second LNG terminal, said an official.

The second LNG terminal is said to be complete, but Pakistan LNG Terminal Limited has failed to incorporate a mechanism for handling the start of gas imports, reported Express Tribune.

As per the official, Fatima Fertilizer is willing to receive first LNG cargo at the new terminal, but argument persists over payment of tolling fee.

A levelized tariff of $0.66 per million British thermal units (mmbtu) has been paid by Fatima Fertilizer, but according to SSGC it is required to pay $1.45 per mmbtu as per an accord approved by regulator.

Due to this controversy, SSGC isn’t willing to permit Fatima Fertilizer to bring and unload cargo at the second LNG terminal.

To kickstart the operations at the second LNG terminal, Pakistan LNG Terminal is putting undue pressure on Pakistan State Oil (PSO) to divert its one LNG cargo there. The official contended it is the responsibility of Pakistan LNG to ensure arrangement of cargo 10 days before the formal commencement of operations at the terminal.

During a meeting held at the start of October, PSO had responded to the request of Pakistan LNG said its managing director. This offer had been made in July 2017, but due to time constraints and contractual obligations under sale-purchase agreement had forced PSO to forward the request to Qatargas for its approval.

According to MD PSO, Qatargas needed to carry out a due diligence to ascertain compatibility and risk analysis and added issues like additional cost also needed to be tackled.

But an SSGC representative opined any diversion of cargo would transgress on its obligations under the LNG supply agreement. In response, MD Pakistan LNG terminal said that responsibility of initiating cargo handling and process was theirs and would pay all costs for it.

Sui Northern Gas Pipelines MD recommended instead of diverting LNG cargo, Pakistan LNG Terminal should opt for an independent arrangement for starting work at the terminal instead.

On this, MD Pakistan LNG Terminal said an alternative solution had been worked out with PSO, for which the company needs to sign an agreement with SSGC, PSO and SNGPL on procedures of cargo handling.