ISLAMABAD: An almost 50 per cent reduction in LNG imports has caused a loss of approximately Rs1.50 billion in three months (May, July and August 2018) to the country because Pakistan Liquefied Natural Gas Limited (PLL) has failed to effectively manage LNG supplies in order to efficiently utilise terminal committed capacity, said sources.
Sources in the power division informed that PLL has so far failed to ensure the import of pre-agreed LNG supplies to the country and thus it has been the reason behind massive financial losses to the country. They said that due to PLL’s alleged failure in ensuring the import of already committed LNG during the months of May, July and August of 2018, the country had suffered a heavy loss of Rs1.5 billion. They added that although the import of six LNG cargos within one month to the country was necessary for PLL to meet electricity demand, it, however, imported only three cargos of LNG in every month.
“Fifty per cent decrease in LNG imports by PLL during the one month of August 2018 has caused a loss of approximately Rs4.2 million to the country,” said sources.
It is relevant to mention here that the country will approximately face a loss of around Rs3 billion ostensibly owing to the fifty per cent cut in the LNG import and lesser usage of LNG terminal of PGPC as well. Similarly, though the import of LNG was below the agreed quantity, and the use of the LNG terminal of Pakistan Gas Port Consortium (PGPC) remained low, yet the price of imported gas witnessed a hike and reached Rs55 per million British Thermal unit (MMBTU) while the country had been facing an approximate loss of Rs0.42 billion in one month.
PLL was to import six cargos of Liquefied Natural Gas (LNG) in one month to meet the energy needs, however, it imported only three LNG cargos to the country and resultantly caused a loss to the tune of Rs42 million in the one month of August. Similarly, in the months of May and July 2018, the country had suffered a loss of Rs1.8 billion.
The sources also said that the poor LNG policy of former Prime Minister Shahid Khaqqan Abbasi coupled with the alleged inefficiency of PLL towards effectively managing LNG supply in order to efficiently utilise the terminal committed capacity and meeting consumers demand would heavily cost the masses. Also, for six months, the masses will face more than Rs3 billion in losses while the owners of PGPC terminal will earn billions of rupees. They said that textile, commercial and fertiliser sectors are forced to avoid the use of LNG due to increases in LNG prices in the country. While the hike in LNG price has been causing the increase in electricity tariff and adding woes and worries to the economy as well, they added.
Copies of available documents further disclose that the Oil and Gas Regulatory Authority (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 and imposed Rs560 million penalty on PLL (Pakistan LNG Limited) and declared the entire supply chain management as inefficient. 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, 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’s MD, dated May 4, 2018.
It is relevant to mention that following reports of alleged pressure by former prime minister Shahid Khaqan Abbasi to revoke OGRA’s decision, the Authority (OGRA) finally decided on May 25, 2018 to cancel the Rs560 million penalty placed on PLL for cancelling the import of four LNG cargoes to the country and decided to pass on millions of rupees penalty to RLNG consumers instead of PLL or the Ministry of Energy.
Also, PLL collected the amount of this penalty (Rs560 million) from the gas consumers of Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL) and paid the amount to Pakistan Gas Port Consortium (PGPC).
Officials at the 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, PLL has been cancelling the import of LNG cargoes from the last many months to the country and has caused additional burden on LNG consumers. They said that because of the cancellation of the import of LNG cargoes to the country, the national exchequer will face heavy losses, while it pays terminal charges to PGPC on top of it. 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, said sources.
It is worth mentioning here that electricity generation with RLNG is cheaper than through furnace oil. However, PLL has reduced the import of LNG to the country following a decrease in the demand of LNG by the power sector, which is highly influenced by the influential furnace oil lobby. The furnace oil lobby has so far left no stone unturned to fail the LNG business in the country. And, that’s why the use of Re-gasified Liquefied Natural Gas (RLNG) in power plants has been witnessing a decline and use of PGPC’s LNG terminal has decreased and is not being fully used as per its installed capacity while additional payments are being made to the PGPC too.
