Expensive Qatari LNG causing additional burden on masses

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ISLAMABAD: Pakistanis are allegedly being deprived of low priced Liquefied Natural Gas (LNG) as the present government continues importing LNG from Qatar under a G2G (Government to Government) agreement, sources revealed.

Raising serious concerns over reduced supply of Re-gasified Liquefied Natural Gas (RLNG) to power sector, Pakistan LNG Limited (PLL) Managing Director (MD) Adnan Gilani, in a letter to Director General (Gas) and the Ministry of Energy (Petroleum Division) has proved wrong the tall claims of Prime Minister Shahid Khaqan Abbasi about the price of Qatari LNG to the country.

According to MD, people of Pakistan are being burdened with the expensive price of LNG and fixed capacity charges of the under utilisation of the second LNG terminal. He said that the first LNG terminal is being utilised at full capacity while the second LNG terminal is faced with under utilisation. He said that this is despite the fact that the first LNG terminal is receiving supplies under a G2G agreement and said agreement allows better flexibility with regard to the delivery schedule and quantities than the supplies being delivered to the second LNG terminal which is currently being supplied through term agreements (such agreements containing less flexibility than those alluded to above).

“Not only is such a treatment unfair, the people of Pakistan are being deprived of the lower priced LNG that is imported by PLL, while further loading the RLNG price with the fixed capacity charges of the under-utilised terminal,”  said PLL MD.

Well-informed sources told that Pakistan has been importing LNG at an expensive price under the G2G agreement from Qatar if compared with the LNG price offered by private cargo companies for the supply of LNG to the country. They said national exchequer is estimated to face a heavy burden of Rs1 billion annually due to expensive LNG, while this burden will further increase if brent crude oil price goes further up. Though PLL has inked agreements with international firms for the supply of LNG to the country, however, cargoes of cheaper LNG are being canceled due to technical faults erupted in 3600MW RLNG based power plants of Punjab.  Millions of rupees worth of monthly burden is being passed on to the masses allegedly because of import of LNG from Qatar at a higher price, penalties of cargo cancellation due to reduced supply of RLNG to 3600MW RLNG-run power plants, and capacity charges of underutilisation of the second LNG terminal said sources.

It is relevant to mention that Punjab’s 3600MW RLNG- run power plants have so far failed to produce required electricity and due to which billions of rupees worth of LNG (Liquefied Natural Gas) terminal and import projects are about to fail.

Ironically, Punjab’s $2 billion and Rs60 crore worth RLNG-run power plants of Bhikki, Haveli Bhadur Shah and Baloki so far could not generate electricity as per their installed capacity apparently due to technical reasons. And, the Energy Ministry has advised Pakistan LNG Limited to reschedule already ordered cargoes, in accordance with the reduced demand of RLNG despite the fact that once LNG supplies are arranged, all such cargoes become firm take or pay supplies.

Though PPL has arranged the import of LNG in line with the confirmation and commitments from Sui Northern Gas Pipelines Limited (SNGPL), however, SNGPL has failed to honour its commitments in the form of its off-take of LNG. To some extent due to this, Pakistan LNG Limited is faced with heavy penalties as it has to cancel more than one dozen cargoes of LNG which were to be consumed in these three RLNG-run power plants.

“The scheduled imports have been disrupted because of reduced off-take of RLNG by SNGPL. As a result, penalties, demurrages and LDs are being triggered,” said document available with Pakistan Today.

Taking cognizance of the issue, Pakistan LNG Limited (PLL) Managing Director (MD) Adnan Gilani in a letter to Director General (Gas) and Ministry of Energy (Petroleum Division), has categorically stated that “PLL is expressly stated that SNGPL and the governing ministry will be responsible for all costs associated therewith.”

He further said that the recent developments have the potential to derail this well-thought –out and essential policy initiative as it opens the way for deficiencies in energy/gas as early as this summer.”

Sources further said that Prime Minister Shahid Khaqqan Abbasi is seriously worried over the failure of 3600MW power plants of Punjab province as they have failed to produce the electricity as per their full capacity. More, billion rupees worth LNG projects including import and terminal are also at stake apparently because of the failure of the $2 billion and 60 crore worth RLNG-run power plants which were installed under the leadership of favourite bureaucrats of chief minister Punjab Shahbaz Sharif. They said PLL inked agreements with international firms to meet the gas demand of 540 million cubic feet per day gas (Re-gasified Liquefied Natural Gas) of these three power plants. They further said that the delay in the full power generation from these plants is costing heavily to the national exchequer while the total loss due to this delay is greater than the loss appeared in much-touted Nandipur Power Plant and NAB (National Accountability Bureau) may take notice of this heavy financial loss to the exchequer.

It is worth mentioning here that the second LNG terminal at Port Qasim was constructed/installed to meet the gas demands of these RLNG-run power plants and agreements were signed with international firms for the import of three LNG cargoes on monthly basis. However, Punjab’s RLNG-run power plants became operational during March to July 2017 with half simple cycle production capacity. These power plants were expected to start full production in December 2017 as per agreement.  And, due to the failure of these three power plants in producing electricity at full capacity, LNG terminal of Pakistan Gas Port is being underutilised (40 per cent) and is causing $150,000 penalty on a daily basis.