Minister for Petroleum and Natural Resour-ces Shahid Khaqan Abbasi appeared visibly irritated at the failure of the Economic Co-ordination Committee (ECC) of the Cabinet in its meeting on November 25, 2015 to fix the price of imported Re-gasified Natural Gas (RLNG), well informed sources told Business Recorder. The Minister told Business Recorder that the sale purchase agreement will be considered in the ECC meeting on Friday (today).
The ECC spent a considerable amount of time debating the minutiae of LGN pricing issue but failed to determine LNG import price and delivered price. "The LNG issue is very complicated and no one was ready to take the responsibility due to fear of NAB," sources added.
According to sources Shahid Khaqan Abbasi, who has been assigned the responsibility for negotiating a deal for the import of LNG from Qatar to mitigate the country's severe energy shortage, was frustrated at the indecisiveness of the ECC on fixation of RLNG price. "ECC should take a decision, approve or reject it; don't put the entire burden on only my shoulders," the sources quoted Abbasi as saying during the ECC meeting. The ECC also discussed the setting up of a company for construction of second LNG terminal under the Government Holding Private Limited.
"There was a chaotic discussion on the LNG issue. The ECC did not take any final decision and constituted a committee under the chairmanship of Secretary Law and Justice to look into a matter from the legal perspective," the sources maintained. Planning Commission, sources said, supported the proposal of a second LNG terminal, in principle, with suggestion that the Petroleum Ministry may consider formation of an independent LNG company responsible for the entire LNG supply chain including LNG terminal, through a joint venture between GHPL and gas utility companies with foreign investors/DFIs or otherwise.
The sources said, the Planning Commission further stated that in order to avoid issues like penalty charges to the terminal operator, the initiation/completion of second LNG terminal should synchronise with the scheduled all other aspects of the LNG supply chain including procurement, pricing, allocation and T&D etc.
Finance Ministry seconded the establishment of a second LNG terminal and added that its backward and forward supply chain linkages should be thought out including as to what will be the arrangement for import of LNG and its off-take, inland transportation and buyers of RLNG. Finance Ministry further argued that GHPL has maintained a strong financial profile represented by un-appropriated profit of Rs 29.798 billion as on June 30, 2014, with a net profit for FY 2014-15 approximately amounting to Rs 26 billion. The funds may be declared as dividend and paid to the GoP, which is the main purpose for which the company has been set up.
GHPL is a small sized company and lacks technical expertise/ resources to undertake such major project as RLNG terminal. However, this is a commercial decision which the company should evaluate and undertake on its own keeping in view the sound business principles and should not seek umbrella approval by the ECC.
In order to avoid complexities Planning Commission supported the proposal of Ministry of Petroleum to establish a separate entity namely "Pakistan LNG Limited" to handle LNG/RNG related business. Although RLN/ Gas supply dynamics are different as compared to oil supply, yet Gas Supply Agreement (GSA) may be based on the analogy of fuel supply agreement already in place for Residual Fuel Oil (RFO)-based power plants.
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