Pipeline capacity allocation to two developers okayed

The Cabinet Committee on Energy (CCoE) on Friday approved allocation of pipeline capacity to two new LNG terminal developers to facilitate their investment in the additional gas infrastructure and once again decided to dissolve Pakistan Electric Power Company (Pepco).The company was disbanded twice in the past.

A meeting of the CCoE, presided over by Planning and Development Minister Asad Umar, “approved the summary submitted by the Ministry of Maritime Affairs on the report of the inter-ministerial committee (IMC) on the establishment of new terminals,” said an announcement.

It said the CCoE had discussed the report and approved the allocation of pipeline capacity and directed the authorities concerned to fast-track the work on setting up new LNG terminals.

The meeting was told the IMC had held 15 meetings between December 2019 and August this year and resolved all pending issues, but the petroleum division and Sui gas companies continued to resist allocation of pipeline capacity to new private sector terminal developers — Energas and Tabeer Energy.

The report stated that the federal cabinet had on September 8 last year “directed the petroleum division to allocate pipeline capacity in the existing and the new planned pipeline within 30 days”. The Oil and Gas Regulatory Authority (Ogra) also directed the Sui gas companies to allocate 300-350mmcfd (million cubic feet per day) of pipeline capacity each to the two terminal developers in May this year. It said the Sui gas companies were “reluctant to allocate pipeline capacity”.

The meeting was told that the gas companies had been denying the existence of any pipeline capacity all these years. Finally, Sui Southern Gas Company Limited (SSGCL) confirmed that capacity was available and agreed to allocate it to both terminals. However, SSGCL was delaying land lease to new terminals for pipeline tie-in points.

“Taking serious view of flouting the order of the regulator”, Ogra again sternly warned the gas companies “to allocate pipeline capacity to new LNG terminals”.

The report stated that there was a consensus, excluding Sui Northern Gas Pipelines Limited (SNGPL), that 600mmcfd of gas pipeline capacity was available for the new LNG terminal developers and the regulator also confirmed the situation. It said SNGPL had a total pipeline capacity of 1200mmcfd and a long-term contract of 1000mmcfd till 2024, while 150mmcfd gas was shifted to K-Electric and 250mmcfd to SSGCL, leaving a spare capacity of 600mmcfd.

The summary noted that the gas companies were averse to deregulating the gas market despite losing substantial gas quantities to pilferage and adding to circular debt of billions of rupees. The summary advocated deregulating the gas sector like aviation, telecom and banking sectors to reduce burden on the exchequer and save taxpayers’ money.

The CCoE directed SNGPL to allocate 250-300mmcfd to both the new terminals and ordered SSGCL to provide tie-in and firefighting facilities to the terminals on same terms and conditions that were given to the existing terminals. It also ordered both terminal developers to sign gas transmission agreements (GTA) with the two gas companies within 15 days and conclude their final investment decisions within 60 days of GTA signing.

The committee approved a summary prepared by the power division for ‘restructuring of Pepco’. It involved change of nomenclature from Pepco to Power Planning and Monitoring Company (PPMC) and delegation of human resource functions of Pepco to respective corporate companies — Discos (distribution companies), Gencos (generation companies) and National Transmission and Despatch Company (NTDC).

The meeting was told the federal cabinet had twice ordered — the latest being in October 2011 — dissolution of Pepco, but legal and statutory process could not be completed. The CCoE decided that the “restricted company (PPMC) will continue to charge a fee to Discos, Gencos, and NTDC and will approach development finance institutions and multilateral agencies to solicit support for capacity building. The composition of the new PPMC’s Board of Directors will also be changed and the restructuring plan will be implemented by December 31 and new human resource will be hired for the company forthwith”.

The committee discussed a summary filed by the power division on policy direction for the operation of RLNG plants out of merit.

The committee reviewed the circular debt report of August this year submitted by the power division and appreciated the fact that the increase in circular debt during the last 12 months was only Rs57 billion.

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