Amendment to Oil and Gas Regulatory Authority (Ogra) rules has been proposed to facilitate import of Liquefied Natural Gas (LNG), informed sources told Business Recorder. Sources told Business Recorder that the recommendation was proposed by a committee established by the Economic Co-ordination Committee (ECC) of the Cabinet with the objective to work out modalities and mechanism to facilitate import of LNG.
The committee was headed by Advisor to the Prime Minister on Petroleum & Natural Resources, Dr Asim Hussain while other members included Member (Energy) Planning Commission, official of Law & Justice Division, Finance Division and representative of State Bank of Pakistan and Board of Investment (BoI). An official of the Planning Commission told this scribe that recommendations finalised by the committee were discussed in a meeting presided over by the finance minister and some additions/changes were proposed.
The committee recommended: (i) long-term LNG import under integrated project structure for 400 mmcfd with delivery point at SSGC receiving point; (ii) fast-track LNG import on tolling basis for 200 mmcfd, under this arrangement LNG would be procured from international sources through any of the three approaches allowed under section 3.2 of the LNG Policy, 2011 ie direct negotiations, competitive bidding or spot purchases; (iii) handle LNG/RLNG delivery to SSGC's receiving point, the Aggregator (subsidiary of SSGC and SNGPL) would invite proposals for setting up of terminal for tolling on competitive basis; (iv) a second round of long-term LNG import under integrated project structure for 400 mmcfd, similar to the first one will be advertised within four (4) weeks of receipt of bids for the first long-term LNG project.
It was proposed that for the long-term projects, the contract would be for 10 years with 5 years price review clause; (v) fast-track would be short-term depending on the commercial needs of the Aggregator and gas utility companies will open revolving standby letter of credit up to three months' value of RLNG/ LNG to guarantee gas off takes, which shall be backed by GOP's sovereign guarantee; (vi) LNG users mainly the power sector would establish letter of credit for three months' LNG value to back up the gas utility companies' letters of credit. The SSGC would immediately finalise the appointment of consultant against the bids received through international bidding process for the integrated and tolling (fast-track) terminals and the consultant would assist in the entire process for import of LNG/ RLNG for both the tolling and integrated projects; (vii) SSGC's consultant must not simultaneously work on the proposed USAID LNG consulting assignment in Pakistan and USAID should independently continue with their process of recruitment of the LNG consultant for necessary technical and legal assistance to government of Pakistan in project evaluation to ensure transparency; (viii) gas utilities will ensure transportation of LNG to the consumers only through transmission and high pressure distribution network for isolation from their spaghetti gas distribution networks; and (ix) cost of LNG will be factored in weighted average cost of gas of the two utility companies as per existing arrangement. However, the RLNG volumes and price will not be considered for UFG benchmarking/disallowance calculations. Any financing cost for LNG/ RLNG purchase will be allowed as admissible expenditure under the revenue requirements to the Gas utilities.
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