Independent Power Producers (IPPs) and the government have reportedly reached an agreement on Liquefied Natural Gas (LNG) deal on a firm basis, on a price to be announced by the Oil and Gas Regulatory Authority (Ogra), well informed sources told Business Recorder. The agreement was reached between the government and IPPs after a threadbare discussions at a meeting held in the Petroleum Ministry on Monday.
Economic Co-ordination Committee (ECC) of the Cabinet is expected to approve the agreement between IPPs and the government on Tuesday (today). To be presided over by Finance Minister, Ishaq Dar, the meeting will be held in Petroleum Ministry. According to sources, Orient Power, Sahpire Power, Halmore Power, Saif Power, Fauji Kabir Wala and Kot Adu Power Company (Kapco)) will be supplied LNG scheduled to reach Pakistan by the end of the current month.
The sources said IPPs have been assured that amount of Letter of Credit (LC) will be paid as per the price of LNG to be fixed by Ogra after inclusion of all costs. Pakistan State Oil (PSO), Sui Southern Gas Company Limited and Sui Northern Gas Pipelines Limited will submit gas purchase invoices to Ogra for fixation of end consumers price. In reply to a question, the sources said, the government and IPPs will incorporate minor changes in Gas Supply Agreements (GSAs) and Power Purchase Agreements (PPAs). IPPs will submit their invoices to CCPA which will subsequently be submitted to Nepra for tariff fixation under a monthly fuel adjustment mechanism.
Earlier, Ministry of Petroleum and Natural Resources (MoP&NR), in its summary had proposed supply of Re-gasified Liquefied Natural Gas (RLNG) to the power sector on "as and when available basis". However, it has now been changed to a firm basis. Sui Southern Gas Company Limited (SSGCL) and Engro Elengy Terminal (Pvt) Limited (EETPL) executed an LNG Services Agreement (LSA) on April 30, 2014 for provision of LNG receiving, storage and re-gasification services under a tolling fee arrangement. EETPL has also executed an Implementation Agreement (IA) with Port Qasim Authority on June 23, 2014 to develop and operate LNG terminal at Port Qasim. The terminal is scheduled to be operational by March 31, 2015.
For the import of LNG, on July 2, 2013, Petroleum Ministry was authorised to engage in negotiations with Qatargas on Government-to-Government basis for importing LNG up to 500mmcfd on delivered ex-ship basis. Accordingly, Pakistan State Oil Company Limited (PSOCL) and Qatargas Operating Company Limited (QOCL) have been nominated by their respective governments to negotiate the LNG Sales Purchase Agreement (SPA). To negotiate the LNG price and other important aspects with Qatargas, ECC on August 15, 2014 approved constitution of an LNG Price Negotiation Committee (PNC).
The Cabinet Committee on Energy (CCE) on November 21, 2014 approved a Clean, Affordable and Reliable Energy (CARE) programme including 325mmcfd RLNG allocation to IPPs located on SNGPL system. The allocation was made on the basis of following proposals of MoP&NR made in the presentation to the Committee:
Orient diesel requires 40mmcfd from March to December 2015, Saif Power, Hallmore and Saphire (diesel) will require 40mmcfd, Kapco, LSFO/HSFO will need 145mmcfd in March 2015, which will be reduced to 120mmcfd by December 2015. Fauji Karbiwala diesel requires 20mmcfd from March to December 2015 and Nandipur HSFO needs 100mmcfd in December 2015.
The allocation of 325mmcfd RLNG to IPPs will be enhanced to 400mmcfd upon completion of system augmentation being carried by SNGPL/SSGC, expected to be completed in last quarter of 2015, power plants as mentioned above.
The ECC on September 29, 2102 and on March 10, 2012 approved the following: (i) RLNG will be supplied to public and/or private sector bulk consumers meeting energy efficiency criteria, to be approved by Cabinet/ECC under firm contracts with take or pay clause against revolving confirm Setter of credits; (ii) gas utilities will transport RLNG to the consumers only through transmission and high-pressure distribution network duly isolated from their spaghetti gas distribution networks; (iii) gas pricing for RLNG buyers (mainly power sector) will be determined on weighted average selling price of the respective sectors. The cost of RLNG will not be passed on to other consumers; (iv) prices will be determined on the basis of weighted average. However, Ministry of Petroleum and Natural Resources will present a detailed plan when prices of LNG will be known after the bidding evaluation; (v) cost of RLNG 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 UFO benchmarking/disallowance calculations; and (vi) any financing cost for LNG/RLNG purchase will be allowed as admissible expenditure under the revenue requirements to the gas utilities.
Under the presently envisaged arrangement, PSO will import LNG on Delivered Ex-Ship (DES) basis from international sources which will be sold to SSGC /SNGPL in a liquid form for storage and re-gasification at the terminal under the LSA between SSGC and EETPL. SSGC will supply RLNG volumes to SNGPL through swap arrangements at different locations including Sawan, Zamzama and Sui fields and will claim reimbursement of charges paid/payable to EETPL under LSA on proportionate basis charge as well as wheeling charges to be determined under IPA Rules 2012. The swap arrangement will subsequently be phased out upon completion/commissioning of dedicated pipelines to be constructed for carrying RLNG. PSO, SNGPL and SSGC are negotiating a tripartite agreement to formalise the envisaged arrangement.
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