OGRA revokes Rs566 mn penalty on Pakistan LNG Limited

ISLAMABAD: Re-gasified liquefied natural gas (RLNG) consumer are likely to bear the burden of over Rs566 million penalty on Pakistan LNG Limited (PLL) since Oil and Gas Regulatory Authority (OGRA) has revoked its decision of penalising PLL over the cancellation of four LNG cargoes.

Following reports of alleged pressure by former prime minister Shahid Khaqan Abbasi to revoke OGRA’s decision, OGRA has finally decided to cancel the RS560 million penalty placed on PLL for cancelling the import of four LNG cargoes to the country and pass it on to consumers.

OGRA has now decided to increase the price of LNG by Rs22 per Million British Thermal Unit (MMBTU) and pass on millions of rupees in heavy penalty to RLNG consumers instead of PLL or the Ministry of Energy is responsible for the cancellation of the LNG cargoes.

Also, PLL will now collect the amount of penalty from the gas consumers of Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) and PLL will pay this amount to Pakistan Gas Port Company (PGPC).

Documents available with Pakistan Today disclose that though PLL has failed to import four LNG cargoes to the country during May 2018. OGRA had previously imposed Rs566 million worth penalty on PLL and declared the entire supply chain management as inefficient on May 4. However, on May 25, 2018, OGRA withdrew its decision of penalising PLL and increased the RLNG weighted average sale price for the month of May 2018.

Sources in Energy Ministry informed that former prime minister Abbasi was annoyed with OGRA for imposing heavy penalty on PGPC. However, following immense pressure from Ministry of Energy including former prime minister Abbasi and PLL Managing Director Adnan Gilani, OGRA delayed its decision to finalise LNG sale price for May and finally took the decision to pass the penalty amount to LNG consumer, on May 25. Sources further added OGRA has withdrawn its decision following an approval of the federal cabinet’s Economic Coordination Committee (ECC).

It is relevant to mention here that Ministry of Energy without getting input from other ministries, divisions, OGRA etc has presented a summary to the ECC on May 24, 2018, seeking approval to pass on the amount of penalty of the PLL to consumers. Moreover, OGRA without waiting for a written and verified decision of the ECC has taken the decision and revoked its previous decision on May 25, just a day after the ECC meeting.

Documents also transpire 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, 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 $1.16 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.

Earlier, OGRA, while determining the weighted average sale price of RLNG for the month of May 2018, has expressed grave concerns. OGRA said contrary to the decision taken by the ECC, the terminal charges have increased to $1.1671 million British Thermal Units (MMBTU) from $0.4177 per MMBTU owing to underutilised 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 further disclose 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 PLL and PSO dated May 4, 2018.

Sources also said that PLL has been cancelling the import of LNG cargoes for the last five months to the country, mainly due to a delay in the commercial operation of the 3600mw capacity power plants at Bhikki, Baloki, and Haveli Bahadur Shah located in Punjab. 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 the 540MCFD gas demand of Punjab’s 3600mw RLNG-run power plants. So far, 15 cargoes have been cancelled. They said PLL MD Adnan Gilani has already informed the ex-PM and Petroleum Division that he is not responsible for the penalty and the loss to the national exchequer, and, the penalty should be paid by SNPL and the Petroleum Division.

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 PGPC 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 Rs566 million to gas consumers, which, otherwise, PLL will have to bear for cancelling the import of LNG cargoes to the country.

A senior official of PLL on condition not to be named said PLL MD has also written a letter to the premier and informed that Punjab’s 3600mw RLNG run power plants have failed to purchase RLNG from SNGPL though PLL has signed agreements with LNG suppliers to bring LNG to the country. He also confirmed that the PLL management has approached OGRA and explained its stance to OGRA.