Second LNG Terminal at Port Qasim: PD directed to probe under utilization charges paid to PGPCL

A parliamentary panel on Monday directed Petroleum Division to investigate the under utilization charges paid to PGP Consortium Limited (PGPCL) on the second LNG Terminal at Port Qasim. The Senate Standing Committee on Petroleum was informed that pursuant to lower demand from the Power Division, the terminal is operating at 54 percent of its contracted capacity while 100 percent capacity payment are payable as per OSA.
Managing Director Pakistan LNG Terminal Limited, Adnan Gilani briefed the committee on the present status of initiation and implementation of PGPCC LNG Terminal 2 at Port Qasim Authority. Mohsin Aziz chaired the meeting of the committee which was held on Monday here at the Parliament House.
"To date 30 cargoes have been unloaded at terminal with average capacity utilization of only 54 percent and lower demand from power sector has led to lower utilization of terminal," Adnan Gilani said.
Six cargoes carrying 600 mmcfd have been unloaded in one month and each cargo was of 100 mmcfd capacity. However, due to lower demand from Power Division, the government has paid under capacity charges of $ 31.5 million to PGPCL in last nine months, the committee was informed.
In last ten months (November 17 to August 18), only in June 2018, six cargoes of 19,200,000 mmbtu LNG were offloaded through terminal 2. During the remaining months, it was under utilized with only three ships with 300 mmcfd LNG.
The member committee argued if there was no demand of LNG by power sector then the volume of LNG should be reduced and new contracts with the government should not be allowed.
Chairperson Oil and Gas Regulatory Authority (OGRA) Uzma Adil said that the authority could not cancel seven issued LNG terminals licenses to private parties - Tabeer Energy (Pvt), Pakistan GasPort Limited, PGP Consortium Limited, Energas Terminal (Pvt) Limited, Engro Elengy Terminal Limited, Global Energy Infrastructure Pakistan Limited and Global Energy Infrastructure Limited, and Bahria Foundation.
She further explained that all new terminals were sector specific and the government has not applied for any new terminal. She said, "The real question is why utilization capacity was not used fully. Why is Power Division producing power from furnace oil instead of LNG as cost production on LNG is much cheaper that furnace oil?"
The chairperson OGRA further said that at one stage the authority decided to curtail the utilization charges of PGPCL which were enormous. However, Economic Coordination Committee (ECC) had decided to make payment to PGPCL as per OSA. Adnan said that PGPCL failed to commission the terminal on time i.e. June 30, 2017. Pakistan LNG Terminals Limited (PLTL) imposed penalty of $30 million. The revised date November 28, 2017 could not be met resulting a further imposition of $20.58 million up to final commissioning date of January 4, 2018, he added.
The committee also expressed its utter displeasure over delay in non-recovery of penalty of $51 million imposed on PGPCL upon failure to commission the terminal on time.
Adnan said that as per agreement with PGPCL, both sides are engaged in negotiation on penalty under a dispute resolution. One representative from both sides is part of this negotiation. However, Ministry of Law has yet to give name of representative from government side after its former representative refused to continue negotiation for some reason.
In his observations, the chairman committee said the PGPCL negotiator is supposedly influential as the government is paying under utilization charges but the consortium is not ready to pay penalty under agreement.
Adnan said that PGPCL was liable to pay customs duty on FSRU which Federal Board of Revenue (FBR) allowed in deferred payments. The PGPCL paid the first two installments and then obtained stay from Islamabad High Court. However, he said the PLTL held the payment of PGPCL equal to customs duty which was five percent of the value of LNG.
The committee further directed the Division to probe while customs authorities allowed one vessel carrying LNG berth on deferred payment.
In his observations, the chairman said that there must be three participants as per Public Procurement Regulatory Authority (PPRA) Rules in any tender. Earlier, Adil informed the committee that M/s Akbar Associates and M/s PGP Consortium participated in the tender and M/s Akbar was disqualified.
The member of the committee Bahramand Khan Tangi said that the presentation did not have the minutes of Board of Pakistan LNG regarding approval of the 2nd LNG terminal.