Steps under way to not let gas crisis hit power supply

Amid gas shortfalls affecting power supplies at the peak of summer, emergency meetings are being arranged at the highest level to facilitate later this month dry-docking of floating LNG terminal of Engro that has blamed the government entities for creating the mess.

This is happening at a time when the hydropower system has its natural constraints, local gas fields require annual turnaround for maintenance and furnace oil supplies at short notice through gallop tender are getting expensive.

Officials requesting not to be named told Dawn that the power and petroleum division and their attached entities were making hectic efforts to minimise the impact of gas shortages through various fuel supply adjustments. They said furnace oil stocks at Kot Addu plant had been beefed up and arrangements were being made to stock up Hubco’s storage so that at least K-Electric’s partial requirement could be met through Hub power plant that normally remained almost closed for being low on merit order because of its furnace oil-based turbines.

With similar adjustments and fire-fighting efforts, the authorities are weighing two options. One of the choices is to enforce loadshedding for 12-15 days with short power cuts per day while the other is to finish loadshedding within a week but with longer cuts per day. It would remain a challenge to maintain load frequencies as demand goes up and system operates on a sub-optimal capacity, an official said.

Sources said Prime Minister Imran Khan had also called an urgent meeting on Wednesday (today) following engagements of some diplomatic channels to let Engro’s Floating Storage and Regasi­fication Unit (FSRU) — Exquisite — move out and ensure alternative arrangements.

The sources said the power division had already complained to the petroleum division that power generation plants were not getting enough allocations of RLNG volumes as per demands placed by the National Power Control Centre (NPCC). In a recent letter to the petroleum secretary, the power division’s secretary noted that NPCC had made an RLNG request of 900 million cubic feet per day (mmcfd) for June, July, August and September and about 700mmcfd for October.

However, gas companies have allocated just 640mmcfd for June, 600mmcfd for July, 420mmcfd for August, 516mmcfd for September and 471mmcfd for October. This means the power plants would be getting 30-53 per cent lower than their LNG requirements during these months. “It is quite evident that the committed volumes are quite inadequate to meet the power generation requirements during the high peak summer months,” the power secretary wrote, adding that reduced RLNG supply to power plants would result in increased consumption of furnace oil and diesel “which is highly uneconomical”.

The power division said the system peak capability would also be reduced drastically in the absence of lower than demanded RLNG which would lead to load management. “Due to very low RLNG allocation in August, downstream plants i.e. Nandipur, Kapco and Fauji Kabirwala power house will remain unavailable as they would in such a case have to be operated on alternate expensive fuel” and hence drastic load management would occur in Gujranwala and Multan electric supply networks.

On the other hand, the Engro Elengy Terminal Private Limited (EETPL) said the planned dry docking of its terminal by June 30 was in accordance with the supply agreement with the Sui Southern Gas Company (SSGC) and unavoidable under international laws. In a statement, the EETPL said it had been discussing dry docking with the SSGC and all relevant government stakeholders since October 2019 and notified them about updates on the dry dock activity on March 30, 2021, after a survey report issued by the Class Society – responsible to maintain overseas certifications of FSRU under international laws – made it clear that FSRU Exquisite must be sent for dry docking latest by June 30, 2021.

“Since the March notification to stakeholders, namely SSGC, SNGPL and PSO, EETPL held multiple meetings to seek their cooperation and flexibility to update the annual delivery plan (ADP) to accommodate the dry dock activity,” the statement said, adding that the ADP was non-binding under the agreement and changes in the plan were an operational norm to ensure coordination among all stakeholders for any contingency planning.

“However, no progress was made as SSGC feared exposure to Liquidity Damages (LD) from SNGPL for any disruption in gas supplies. Therefore, SSGC continued to resist change in the annual plan to allow for the mandatory dry dock activity to maintain class certificates and as required under the LSA as well,” EETPL said, adding that the deadlock persisted and reached the Cabinet Committee on Energy (CCoE).

It said: “Engro Elengy and the operators of Exquisite had made their best efforts to coincide the vessel replacement with shutdown already planned by the gas companies for August. In our previous engagements, the stakeholders had never raised any concerns about dry-docking around the end of June.”

Engro said dry dock required period, twice over 15 years, was counted as shutdown days and the prior notification to all stakeholders was given to ensure adequate planning for the country’s energy needs. “Vessel integrity related shutdowns are always managed mutually, but this activity has been trivialized which has caused a delay in decision making,” it said, adding that all stakeholders were being requested to ensure the dry-docking activity and switch over to more capable FSRU Sequoia was done smoothly, enable regasification services resumption in 3-4 days and meet all performance obligations under the agreement.

It said: “Engro pioneered investment in Pakistan’s LNG sector at a very challenging time and since then has been fully supportive of government’s initiatives to further develop the LNG market. In case international Class Society laws are breached and routine matters like dry-docking are misconstrued for no reason, it will send a negative signal to foreign investors who are keen to explore investment opportunities in this sector.”

Engro confirmed that in its last two meetings, the CCoE had seen a deadlock between the petroleum division and the ministry of maritime affairs, while Finance Minister Shaukat Tareen and CCoE chair (Asad Umar) had also expressed fears that the replacement process would slow down economic activity due to disruption of LNG supplies to power plants, industrial units and transport sector.

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