Allocation of idle LNG capacity to private sector can save $100m

Pakistan, which is considering renegotiating liquefied natural gas (LNG) import tariffs and terminal charges to make them cost-effective, can immediately cut the cost by over $100 million per annum by allocating idle import capacity to the private sector. The country can save the cost much before renegotiating LNG agreements with suppliers and domestic import terminal operators. “Pakistan can immediately save expenses of over $50 million per annum by allocating the idle capacity of 400 million cubic feet per day (mmcfd) to the private sector,” an industry source told The Express Tribune. Apart from this, he said, the allocation of the idle capacity would generate revenue of over $50 million for the two state-owned gas utilities – Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) – for transporting imported gas from Port Qasim in Karachi to Punjab-based consumers through their pipeline networks. The previous Pakistan Muslim League-Nawaz (PML-N) government had agreed to pay $272,000 and $245,000 per day in capacity utilisation charges, irrespective of the usage, to Engro Elengy Terminal Pakistan Limited (EETPL) and Pakistan LNG Terminals Limited (PLTL) respectively. Pakistan currently pays $190 million in capacity charges per annum. It is utilising 100% of the installed capacity of 600 mmcfd of Engro terminal. However, in the case of PLTL terminal, it is utilising only one-third of the capacity of 600 mmcfd, but pays full capacity charges of $245,000 per day, including over $50 million per annum for the idle two-thirds of the capacity. “The $100-million savings will reduce the LNG import bill by around 5% compared to total LNG imports of $2 billion per annum,” the industry source suggested. Besides, the government may stave off huge losses of millions of dollars due to gas leakages during transmission from the port to end-users. “Transmission and distribution losses come to around 9% of the imported gas (value of around $2 billion),” the source said. Energas LNG Terminal (ELT), which is part of a buyers’ consortium representing the private sector, is one of those who have asked the government to allocate the idle LNG capacity to them. ELT CEO Anser Ahmed Khan said the government’s response was encouraging as it was studying possible ways in which the idle capacity could be offered to the private sector. The ELT consortium is also building an LNG import terminal in Pakistan. Its business model is similar to those prevalent in the Far East and Europe, where end-users of gas are the terminal developers. They have no reliance on the government unlike Pakistan’s two existing terminals which charge $272,000 and $245,000 per day in capacity charges. “As a private sector buyer, we are confident of importing gas at very competitive rates and supplying it to our shareholders and other clients at comparatively lower tariffs,” emphasised Khan, who has over 18 years of professional experience in the international oil and gas sector. “The immediate challenge is to make gas affordable and competitive rather than creating additional demand,” he said. “Encouraging competition in the country will help provide cost-effective gas to power, industrial and transport sectors. We need to create a sustainable environment to reduce reliance on government subsidy and focus on self-sufficiency…Competition allows us to achieve these objectives,” he said.

https://tribune.com.pk/story/1863479/2-allocation-idle-lng-capacity-private-sector-can-save-100m/