Poor planning for the import of liquefied natural gas (LNG) has earned a bad name to the government as gas load-shedding in various parts of the country provided detractors an opportunity to criticise the government, noted cabinet members in a recent meeting. During discussions, the cabinet members highlighted that considering the gas supply and demand situation, proper planning should have been done well ahead of time. They were of the view that the ongoing gas crisis had given critics an opportunity to rail against the government. With the country in the grip of a cold wave, the cabinet was informed that if the weather improved, the curtailment of 40 million cubic feet of gas per day (mmcfd) to the power sector would be restored first followed by other curtailments in reverse order. The members also drew attention of the cabinet to the illegal installation of compressors in major cities, which affected gas pressure in supplies to domestic consumers. It was urged that theft and pilferage must be strictly checked. The special assistant to prime minister on power apprised the cabinet that Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) were removing 100 and 50 illegal compressors a day, respectively. In addition, there were flaws in the way the distribution system expanded indiscriminately, which would take time to rectify. The cabinet members stressed that domestic consumers, especially those in urban centres who had no alternatives, must be given priority. The SAPM on power pointed out that due to curtailment of regasified liquefied natural gas (RLNG) supply, electricity demand would be met through residual fuel oil (RFO)-based power generation. To adjust the additional cost, tariff differential subsidies (TDS) would have to be increased. On a query by a member on the quantum of gas circular debt, it was informed that due to the policy of the previous government to sell gas at 40% of the cost, the gas circular debt increased from Rs192 billion to Rs300 billion. However, the corrective measures taken by the present government would result in reducing the gas circular debt to Rs250 billion next year. The minister for maritime affairs drew attention to the delay marring the start of construction of two new LNG terminals due to allocation of pipeline capacity by the Petroleum Division. Special assistant to the prime minister on petroleum explained that as per policy the pipeline capacity was allocated on first-come-first-served basis. In the absence of idle capacity, the allocation to the existing LNG terminal would have to be diverted, which was against the policy. He apprised the meeting that most of the problems stemmed from the decision of the previous government to introduce LNG in the country without constructing any storage facility and declaring it as a petroleum product, which cost almost double the cost of locally produced gas. It was further informed that the Cabinet Committee on Energy (CCOE) had directed that if the private sector did not bring additional volume, then “PLL/SSGC may directly decide to utilise the capacity”. It was told that any excess capacity of an existing terminal by its owner was to be operated on a revenue-sharing model with the government, and the sharing was to be determined by a committee headed by the Planning Commission deputy chairman. The report of the committee was still awaited despite repeated reminders by the Petroleum Division. Consequently, LNG imports of 150mmcfd by the private sector could not be realised because of non-finalisation of terms of revenue-sharing. In the third week of October, Pakistan LNG Limited (PLL) issued tenders for six spot cargoes instead of four (with four being sufficient for its contracted capacity of 1,200mmcfd) for the month of January 2021. PLL was able to secure three LNG cargoes and the fourth cargo, which was scheduled for December 30, 2020 (and was to be used for January) was moved a few days to complete the slate of 12 cargoes for January 2021 at the lowest ever average cost of $6.34/mmbtu DES price for any January on record. Published in The Express Tribune, January 5th, 2021. Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.
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