TUG OF WAR BETWEEN GOVT, OGRA
Islamabad—Under highly questionable circumstances, the government is exerting pressure on the Pakistan’s oil and gas regulator to determine LNG sale price on its terms while the regulatory body is reluctant to do so.
As per exclusive details gathered by Pakistan Observer, Oil and Gas Regulatory Authority (OGRA) has so far declined to determine the sale price of Liquefied Natural Gas (LNG) as per sweet will of the government, while around Rs 29 billion worth of the gas has been sold during last four months in the country.
In the existing scenario, Pakistan is importing LNG from Qatar to mitigate ongoing energy crisis. The gas supply started from March 30 this year to the country’s power plants, fertilizer manufacturers and Compressed Natural Gas pumps. However, the regulatory authority (Ogra) has so far not determined the price of LNG due to some known and unknown reasons.
Desirous of staying unnamed, sources at Petroleum Ministry disclosed that absence of LNG price notification is only because the shareholders of Pakistan State Oil (PSO) and Sui Northern Gas Pipe Lines (SNGPL) are all out to maximize their interests by securing additional margin in the supply of LNG. No matter if it costs heavily to poor countrymen. “Well, you know, as a matter of fact, the SNGPL has been indebted to PSO of Rs29billion so far only due to the absence of pricenotification, while the gas utility (SNGPL) is selling the LNG at $12.5 per Million British Thermal Unit (MBTU),” the officials commented in a detailed sitting with this correspondent.
The sources are of the considered opinion that the authority cannot fix the price of LNG without the scrutiny of related documents and the necessary process involved. Regulator has sought documents from the PSO with regard to details of expenditure on the supply of LNG and especially the invoice of LNG. They said regulatory authority has serious reservations over four per cent margin of the PSO in the supply of LNG to country, adding, that masses might bear additional burden ofbillions of rupees if necessary rules and regulations are not fulfilled before determining the price of LNG.
Earlier, federal cabinet’s economic coordination committee (ECC) in its meeting held on 06-06-2015 considered petroleum ministry’s proposal regarding the sale price of RLNG (Regasified Liquefied Natural Gas).
Exclusively available with Pakistan Observer, highly classified documents available with this scribe disclosed that earlier on 27th July, the Ministry of Petroleum and Natural Resources (MPNR) in a letter issued seven point policy guidelines to Ogra for fixing the sale price of the RLNG. As per the documents, the ministry advised Ogra pricing component for RLNG which are mentioned as following:
1. LNG DES (Delivered Ex Ship) price including any take or pay volumes, losses on account of Net Sale Proceeds and relevant adjustments due to exchange rate. In case of FOB cargoes, the price should include FOB price plus freight charges.
2. PSO’s other imports related actual costs.
3. PSO’s Margin up to 4 Pc of LNG DES price, subject to review after three months.
4. Terminal charges under LNG Service Agreement (LSA).
5. SSGCL (Sui Southern Gas Company Limited)/SNGPL cost of service (to be determined by Ogra).
6. SSGCL/SNGPL administrative margin up to $0.05/MMBTU (to be paid in rupees) for each company (to be treated as non-operating income), subject to review after three months.
7. Transmission losses at 0.5% and distribution losses, if any (to be determined by Ogra.
Petroleum Ministry also told Ogra that PSO has been allowed to incorporate any differential between actual versus provisional price in subsequent pricing period upon availability of actual cost. It further said that this will remove any ambiguity in the pricing mechanism and ensure that the actual and auditable prices are charged to customers. However, Ogra did not determine the price of LNG despite passing four months.
Petroleum ministry’s official said that the RLNG price will be determined by Ogra and notified by PSO on similar line to that for petroleum products pricing including Exchange Rate adjustments. However, RLNG price will be determined on the basis of price of LNG cargoes scheduled to arrive in Pakistan during the relevant month.