The Ministry of Petroleum and Natural Resources has offered Textile Industry round-the-clock supply of electricity at 9 cents per unit in case the industry stops using natural gas. Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi made these remarks at a press conference here on Tuesday. He said the representatives of All Pakistan Textile Mills Association (APTMA) have declined to accept the government's offer because gas is much cheaper and profitable for the textile units as compared to electricity.
The textile industry-based Independent Power Plants (IIPs) are producing power at Rs 6 per unit using gas and selling the extra power to the government at higher rates. Replying to a question, the minister said the government has slashed the construction of second Liquefied Natural Gas (LNG) terminal project at Port Qasim, after the lowest bidder went in litigation, as the government was of the view that some of the bidding documents were dubious. Pakistan's economy has been facing a serious energy crisis. Its local output of the natural gas is around 4 Billion Cubic Feet per Day (BCFD), while demand is up to 6.5 BCFD. To plug the gap government has to sort out the issue on a war footing. Pakistan, an energy deficit country, is gradually increasing its reliance on imported Liquefied Natural Gas (LNG) and enjoying the lowest rate on gas import from Qatar and will save up to Rs 100 billion per annum on account of price and efficiency differential. The government will encourage private sector to start the import of LNG, the minister said.
"As our gas fields are depleting, and in future for domestic use you will need imported gas. Only locally produced can compete with LNG. On annual basis, LNG is cheaper than Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline projects. In the face of depleting natural gas the only cheaper alternative is LNG and replacing diesel-based power plants with LNG will save Rs 100 billion a year for national kitty," the minister maintained.
Almost all the issues creating hurdles in the agreement for the LNG agreement have been resolved. "Only the issues related to a price mechanism and Standby Letter of Credit (SBLC) have yet to resolved but we are hopeful to sort it out by the first week of October", the minister added.
Two years ago the industry was at a standstill as there was not enough gas available for the fertilisers sector, power plants and other industries. Due to the import of LNG, majority of fertiliser and power units have started working. "Due to LNG we have added 600 mw of electricity to the system and since March 26, 2015 when the LNG import started into the country, 10 consignments have been imported so far and till March 26, 2016, we have to bring 15 more ships under the contract. However, if we increase the number of ships the tolling charges will reduce, so we target to import around five more ships," he added.
"Once LNG business is stabilised in the country the Pakistan State Oil will receive a 30 cent margin, Engro LNG Terminal 66 cent, 7 cent retainage, 5 cent SSGC LNG terminal maintaintenance fee, 28 cent SSGC transportation fee, 52 cent SNGPL transportation fee and Port Qasim Authority will get 30 cent as shipping charges," the minister said and added that final consumers will get the commodity in the range of $11-12 per MMBTU, which will be a lowest as compared to the regional prices.
Abbasi said that around 600 megawatt RLNG-based electricity has been added to the national grid. RLNG-based power projects of 3600 megawatts are in advance stages and will be able to start adding energy to the system by summer 2017. It is the lowest cost energy and its efficiency will be 62.5 percent while in Muzafargarh and Jamshoro it is around 30 percent.
"For the last one and a half years, we are negotiating a Sale-Purchase agreement (SPA) with the Qatar government, but we await the Oil and Gas Regulatory Authority's decision of determination of tolling of the Sui Northern Gas Pipeline Ltd (SNGPL) and Sui Southern Gas Company Limited (SSGCL). SNGPL has requested for a tolling fee of 52 cents while SSGC's demand is 28 cent/mmbtu.
Across the world, the LNG purchases are always negotiable and the government can also negotiate the lower price of LNG, however the PPRA rules have tied our hands. "If you are allowed to participate and play in the market you can get good price," the minister claimed. The price of LNG is ranging from 11.2-17.2 percent of Brent and Pakistan can get a deal up to 13.5 percent of Brent.
However, the minister said the main thing in LNG business is not the price you get but the terms of agreement benefit you. "There are some companies which have offered the prices of 8 percent of the Brent but there is no guarantee of supply, which is the most critical point in LNG business," the minister added.
"We have government to government agreement with Qatar, as both PSO and Qatargas are government-owned companies, and at present Pakistan is importing the commodity at the lowest rate in the region, which is used in power generation and also in CNG stations as well as fertiliser industry.
The government gave the contract to the Engro Corporation after a bidding process to build Pakistan's first ever LNG terminal at Port Qasim. The company completed the project in 11 months after spending $150 million. It also took a floating storage re-gasification unit (FSRU) on lease with a capacity to re-gasify up to 600 Million Cubic Feet per Day (MMCFD) of the commodity which will be injected into the system of Sui-Southern Gas Company (SSGC).
The minister said there will be no differential in LNG price for any consumer. "SNGPL is charging $2.04 from the CNG sector for Unaccounted for Gas (UFG) losses . Globally Pakistan is a market to consume up to 15 million tons of LNG per annum and the government is working to enhance LNG import to overcome serious gas shortage problems. Pakistan was seriously perusing the completion of IP and TAPI gas pipelines projects, but completion of these projects will take 2 to 3.5 years so in the short run LNG is the best and easy available solution to Pakistan's current energy crises, he added.
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