Underutilisation of PGPC’s LNG terminal may cost govt $40m in 2019

ISLAMABAD: Pakistan LNG Terminal Limited (PLTL) has said that the gas consumers would have to pay an additional amount of approximately $40 million in 2019, as the idle capacity of LNG terminal of Pakistan Gas Port Consortium (PGPC) during the year would be around 53pc.

Based upon the 2019 Annual Delivery Plan (agreed between Sui Northern Gas Pipeline Limited, Pakistan State Oil, Pakistan LNG Limited, PLTL and PGPC), the PLTL, in a letter to the Petroleum Division, pointed out that underutilisation of PGPC’s LNG terminal in 2019 would cost around $40 million to the gas consumers.

According to PLTL, the terminal’s idle capacity would increase from 47pc in 2018 to 53pc, while regasification tariff would be $0.7202 per Million British Thermal Unit (MMBTU), 72pc higher than the contractual levellised tariff of $0.4177.

PLTL stated that the regasification capacity at both terminals is paid through guaranteed fixed capacity charges, therefore, any idle terminal capacity results in higher regasification tariff. Owing to the idle capacity of 47pc in 2018, which was also the first operating year of terminal 2, the average tariff was worked out to be $0.7841 ($0.4177 at full capacity), resulting in an additional cost of approximately $45 million (Rs6.2 billion) to the consumers.

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“At present, terminals 1 & 2 are being managed independently from each other. Although capacity charges are guaranteed at both terminals, utilization charge is variable. The terminal with cheaper utilization charge should be given priority,” it was stated in the letter. “Synergies exist in load management for each terminal, considering the fixed/variable cost structure of the respective terminal.”

PLTL advocated that in order to minimize the idle capacity, both terminals may be allowed to provide regasification services to interested private sector parties in addition to their existing arrangements, while this shift in policy would acquire regulatory, contractual as well as operational issues.

It said involvement of the private sector could reduce the idle capacity charge for one cargo by $1.14 million, for five cargoes by $5.7 million and for 10 cargoes by $11.4 million, adding that a substantial part of the government’s LNG import bill and guarantees for LNG cargo LCs would shift to the private sector.

In its recommendations to the Petroleum Division for optimal utilization of LNG terminals 1 and 2, PLTL asked the Ministry of Energy to reconfirm the RLNG demand for the year 2019, before further steps are taken.

“A Third Party Access to the terminal will be beneficial and accordingly must be pursued,” it was recommended. “PLTL business model should be changed to a multiuser terminal model. Next step will be the issuance of an expression of interest to the private sector and appointment of a consultant to develop an RFP along will legal agreements etc.”

PLTL expressed hope that these methodologies would pave the way towards optimal utilization at LNG terminals besides opening avenues for private participants in RLNG value chain, which would result in competitive RLNG prices and lowered financial risk for the government.

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Ahmad Ahmadani
The author is a an investigative journalist at Profit. He can be reached at [email protected]
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