Weighted average cost of LNG: petroleum ministry's pricing mechanism opposed

The Planning Commission is opposing weighted average cost of imported LNG because it will increase the existing gas price for domestic consumers.
Sources told Business Recorder that a committee, constituted by the ECC on LNG import, met a couple of days ago with Finance Minister Dr Abdul Hafeez Shiekh to finalise modalities and held detailed discussions, especially on the impact of LNG pricing mechanism proposed by the Petroleum Ministry.
Sources said that the Petroleum Ministry's proposal that the cost of imported LNG should be factored in the weighted average cost of gas and the impact passed on to all consumers had not received any support.
The Planning Commission was of the opinion that implementation of the proposed pricing mechanism would increase the gas price for domestic consumers and suggested that imported LNG should be dedicated to the power sector and bulk consumers.
Another suggestion made by the Planning Commission was to keep the price of imported LNG below the imported furnace oil price. In any case, the commission said, LNG's landed price should not exceed 80 percent of the imported furnace oil price at BTU parity.
Sources said that the committee meeting made some changes in recommendations and decided to re-circulate them among all stakeholders after incorporating them.
The committee suggested to import LNG in a phased manner and proposed project structures in this regard. The committee also proposed long-term LNG import under integrated project structure for 400 MMCFD and RLNG delivery at SSGC receiving point apart from fast track LNG import on tolling basis for 200 MMCFD.
Under this arrangement, LNG will be procured from international sources through any of the three approaches allowed under Section 3.2 of the LNG Policy, 2011 - direct negotiations, competitive bidding or spot purchases.
To handle LNG delivery at SSGC receiving point, the Aggregator, (a subsidiary of SNGPL and SSGCL), would invite proposals for setting up a terminal for tolling on competitive basis.
The committee recommended that the second round of long-term LNG import under integrated project structure for 400 MMCFD, similar to above would also be advertised within four weeks of the receipt of bids for the first long-term LNG project.
The contract for the long-tem projects would be for 10 years, with a five-year price review clause.
Fast track will be short-term/spot, depending on commercial needs of the Aggregator.