New LNG terminal developers: CCoE approves pipeline capacity of 500-600mmcfd

In a major step towards private-to-private LNG business in the country, the Cabinet Committee on Energy (CCoE) met on Friday with Federal Minister for Planning and Special Initiatives Asad Umar and accorded approval to the pipeline capacity of 500-600mmcfd for both new LNG terminal developers — Energas and Tabeer Energy.

Under the decision, new LNG terminal developers Tabeer Energy has been allocated the pipeline capacity of 200mmcfd in the SSGC system and Energas 150mmcfd. This is how both the LNG developers will be having 350mmcfd gas pipeline capacity in the SSGC system. However, in the SNGPL system, Tabeer Energy will be having capacity in the range of 50-100mmcfd and Energas 100-150mmcfd and in this way both the LNG developers will have total capacity in the SNGPL system in the range of 150-250mmcfd. In the two systems of both the Sui companies, both the LNG terminals will have 500-600 mmcfd pipeline capacity.

Both utilities, Sui Northern Gas Private Limited and Sui Southern Gas Company Limited, have offered firm commitment to new LNG developers for making available pipeline capacity on a three-month rolling basis and the capacity will be available with effect from January 1, 2023 to the new LNG developers.

Both the LNG developers have been asked to communicate within 60 days the dates of FID (Final Investment Decision) along with dates of commercial operations (CoDs), so that both the utilities are enabled to effectively manage capacity allocation accordingly. Both the developers have also been asked to conclude Gas Transportation Agreement (Access Agreement) with both the gas companies so as to enable the OGRA to initiate the approval process.

When contacted, Secretary Petroleum Dr Arshad Mehmood confirmed the development, saying the approval of the pipeline capacity allocation to the new LNG terminal developers will usher in a new era of Business-to-Business (BtB) on private mode LNG business in the country. He termed the decision of the CCoE as the biggest-ever milestone in terms of implementation of third party access rules.

Top official sources said the secretary petroleum played a pivotal role in persuading the gas companies, Sui Northern and Sui Southern and OGRA, to offer firm commitment of pipeline capacity to both the terminal developers so that they could take Final Investment Decision (FID) and start the construction of LNG terminals with timelines. They also said that both the LNG developers also sought from the gas companies the most lucrative customers for selling their RLNG to them, which is not possible for the gas companies i.e. to abandon those customers. However, industrial sources said that in the SNGPL system alone, the demand of RLNG stands at 1,600mmcfd, out of which 600mmcfd can easily be allocated to the LNG developers, but they have been given 150-250mmcfd.

The sources said that Energas wants to provide RLNG to its business group’s projects in various sectors of the economy, which include Lucky Cement, and the power projects of Sapphire and Halmore. The requirement of these said projects is more than 250mmcfd gas but Energas has been allocated only 100-150mmcfd capacity in the Sui Northern System. However, the top official in the Energy Ministry said that this issue has been resolved.

The forum also approved the Restructuring of Pakistan Electric Power Company (PEPCO). The major restructuring proposals approved include change of the nomenclature from PEPCO to Power Planning and Monitoring Company (PPMC); HR functions of the company delegated to the respective companies; the restricted company will continue to charge a fee to DISCOs, GENCOs, and NTDC; the restructure company will approach the Development Finance Institutions and Multilateral Agencies to solicit support for capacity building; composition of the Board of Directors of the company will be changed and the restructuring plan will be implemented by December 31, 2021 and new HR will be hired for the company forthwith.

The CCoE also discussed the summary submitted by the Power Division on policy direction for the operation of RLNG plants on merit. The meeting instructed that for ironing out the operational problems arising due to the import of RLNG, the minister of energy will have a meeting with OGRA and NEPRA. The solutions and the proposed way forward will be shared in the next meeting of CCoE.

The CCoE appreciated the fact that the increase in circular debt during the last 12 months is only Rs57 billion which shows a sharp reduction in comparison to Rs450 billion per year inherited from the previous government.

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