OGRA penalises PLL Rs560 mn over cancellation of four LNG cargoes

PLL has been cancelling the import of LNG cargoes from the last five months to the country

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ISLAMABAD: In a blow to the government’s efforts to promote LNG business in the country, OGRA has imposed a Rs560 million penalty on PLL (Pakistan LNG Limited) and declared the entire supply chain management as inefficient.

OGRA, while determining the weighted average sale price of Re-gasified Liquefied Natural Gas (RLNG) for the month of May 2018, has expressed grave concerns. Contrary to the decision taken by the Economic Coordination Committee (ECC), the terminal charges have increased to $1.1671 million British Thermal Units (MMBTU) from $0.4177 per MMBTU owing to underutilized capacity.

“The authority observed with concern that inefficient management of LNG supply chain is unnecessarily increasing the terminal charges directly impacting RLNG price, which is against ECC and public interest, said the OGRA document, a copy of which is available with Pakistan Today.

Documents also disclosed that in the previous month, terminal charges were higher. The same, however, was provisionally allowed on the basis that PLL shall recoup the deficiency in the coming months, which it has not done so far.

“The authority, therefore, in view of foregoing determines the terminal charges at $0.4177 per MMBTU and advises M/s PLL to effectively manage LNG supply in order to efficiently utilise the terminal committed capacity and meet consumers demand”, said OGRA in a letter to MD, PLL and PSO dated May 4, 2018.

“Furthermore, it is also pertinent to highlight that M/s PLL also has the RLNG sale license; it should explore multiple avenues for marketing and sale of RLNG in addition to its bulk consumers”.

It is relevant to mention that PLL was to procure six cargoes to optimally utilise the capacity of PGPC’s terminal.  And, PLL was to pay 41 cents per MBTU as terminal charges of PGPC. However, M/s PLL has planned the procurement of only two cargoes. As a result of import of only two cargoes and re-gasification, PLL will have to bear one dollar and sixteen cent per MMBTU. Furthermore, OGRA determines LNG cargoes procured by PLL and PSO and terminal charges on a monthly basis. OGRA also approves the RLNG price for concerned gas consumers.

The sources also said that PLL has been cancelling the import of LNG cargoes from the last five months to the country, mainly due to a delay in the commercial operation of the 3600mw capacity power plants of Bhikki, Baloki, and Haveli Bahadur Shah located in Punjab province. They said billions of rupees worth LNG import and the terminal project was about to fail due to a delay in the commercial operations of the three 36mw power plants.

Officials at Petroleum Division on condition of anonymity said that PLL inked agreements with international suppliers to meet 540MCFD gas demand of Punjab’s 3600mw RLNG-run power plants. So far, 15 cargoes have been cancelled. They said MD PLL Adnan Gilani has informed the PM and Petroleum Division that he is not responsible of the penalty and the loss to national exchequer. And, the penalty should be paid by SNPL and Petroleum Division.

It is also learnt from the document that MD PLL has written a letter to the premier and informed that Punjab’s 3600mw RLNG run power plants have failed to purchase RLNG from Sui Northern Gas Pipelines Limited (SNGPL) though PLL has signed agreements with LNG suppliers to bring LNG to the country.

Well-placed sources in the ministry of energy on condition of anonymity informed that because of the cancellation of the import of four LNG cargoes to the country, the national exchequer will face heavy losses, while it pays terminal charges to Pakistan Gas Port on top of it.

Also, international suppliers will also impose a penalty on PLL for cancelling four cargoes of LNG for May 2018. They said PLL has sought from OGRA to pass on Rs560 million to gas consumers, which, otherwise, PLL will have to bear for cancelling the import of LNG cargoes to the country.

Sources also confirmed that the PLL management has approached OGRA and explained its stance.

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