ISLAMABAD: The government is considering allowing power producers to directly import liquefied natural gas (LNG) by utilising the idle capacity of existing LNG terminals, as the country grapples with gas shortages that have contributed to electricity outages.
The Petroleum Division has proposed amendments to the existing policy framework to allow unutilised LNG terminal capacity to be allocated to power plants for importing gas for their own consumption.
Pakistan LNG Limited (PLL) has so far retained a central role in LNG imports and the allocation of spare terminal capacity, although the country’s LNG terminals have frequently operated below their available capacity.
Under the proposed mechanism, unutilised capacity could be offered to private parties according to their requirements, in line with Clause 6.2(a) of the LNG Policy 2011.
The proposal has been submitted to the Economic Coordination Committee (ECC) for approval.
Spare capacity to be auctioned
The Petroleum Division has proposed that, instead of allocating spare capacity on a three-month rolling basis, the relevant state entities — Sui Southern Gas Company (SSGC) for the first LNG terminal and PLL for the second — should be allowed to auction operationally available capacity for a specified period and quota.
The duration and quota would be determined by the relevant regulator after taking into account downstream demand and the country’s LNG import requirements.
The move comes as Pakistan faces increased pressure on gas supplies following disruptions to LNG shipments through the Strait of Hormuz amid the US-Iran conflict. Qatar has been unable to deliver some contracted LNG cargoes, forcing PLL to arrange spot cargoes at significantly higher prices.
For years, consumers have continued to bear LNG terminal capacity charges despite the facilities remaining underutilised because state-owned entities were unable to arrange sufficient LNG supplies.
According to the Petroleum Division, consumers have been paying more than $0.2 million per day in capacity charges for LNG terminals despite periods when no gas was being supplied through the facilities by state entities.
LNG demand rises amid supply disruptions
Pakistan had already agreed with Qatar to divert 24 LNG cargoes to other destinations during the current year because of relatively weak domestic gas demand. However, LNG demand subsequently increased following the escalation of the US-Iran conflict, while Qatar’s shipments were disrupted.
The situation has exposed the gap between available regasification infrastructure and the country’s ability to secure LNG supplies when demand rises.
Pakistan currently has two LNG terminals. At the second terminal, the government has contracted regasification capacity of around 630 million cubic feet per day (mmcfd), with peak capacity of 690 mmcfd on a reasonable-endeavour basis when required. The terminal has a daily delivery capacity of around 630 mmcfd.
Third-party access
The proposed use of spare capacity is also linked to the third-party access provisions of the LNG Policy 2011.
Under the policy, LNG terminals and associated facilities are to operate under a regulated third-party access (RTPA) framework, based on published or negotiated tolling tariffs and a competitive, non-discriminatory environment.
The policy provides for negotiated third-party access (NTPA) for LNG terminals and associated facilities developed for dedicated or own use.
The proposed policy change would therefore provide a mechanism for available terminal capacity to be commercially utilised by other parties, while allowing the regulator to determine the applicable arrangements based on downstream requirements and market conditions.
The government is now seeking ECC approval for the proposed mechanism as it looks to make greater use of existing LNG infrastructure amid growing pressure on domestic gas and electricity supplies.
Story by ZAFAR BHUTTA
