ISLAMABAD: After the un-ceremonial demise of Mashal LNG import plan, the government has decided to withdraw processing of Liquefied Natural Gas (LNG) import plan from Sui Southern Gas Company and ask the interested investors to directly apply before the Oil and Gas Regulatory Authority (Ogra) to get licence for setting up of LNG terminals and send out facilities.
Informed source said the flagship Mashal LNG import plan that became victim to political and bureaucratic wrangling, and ultimately called into question by the Supreme Court of Pakistan, had been terminated by the government, without making a public announcement, although the court had only called for ensuring transparency in the process.
Petroleum Minister Dr Asim Hussain told Dawn that the government would no more involve itself in the import project and would only facilitate through third party access by providing transmission system of gas utility companies to import LNG, set up re-gasification plants and send it to gas transmission system at their own risk and cost.
The prospective investors would themselves negotiate LNG price and supply contracts with big parties like power projects by utilising the transmission system of the gas utility companies. He said the government would also investigate why some companies despite having licences for setting up of terminals and LNG imports for more than four years had not made progress.
About 17 international and domestic firms had submitted their expressions of interest (EoIs) in response to invitations sought by SSGC in May this year for capacity allocation in its transportation system. The companies were to develop their own LNG floating storage and re-gasification units (FSRU), arranging their own supplies of LNG and securing their own buyers of re-gasified LNG (RLNG), including to existing gas utilities.
Under the yet to be approved draft Third Party Access Rules, the SSGC was initially expecting 500 mmcfd (million cubic feet per day) of RLNG to start deliveries in the second quarter of 2012. The plan originally envisaged development of interconnection from the entry point at the LNG terminal to the nearest entry point of SSGC transmission system, to be developed by the investor, with in-built capacity of additional supply up to 2 billion cubic feet of gas.
Ogra’s member gas Mansoor Muzaffar told Dawn that petroleum minister Dr Asim Hussain had agreed to streamline the import process by assigning its regulated responsibility to the Ogra. Now, either the Ogra will write to the interested parties to apply for licence to construct terminal and send out facilities.
Alternatively, the petroleum ministry would ask the SSGC to write letters of appreciation to prospective investors for taking keen interest in the project and advise them to seek relevant licences from the Ogra.
He said the Ogra would process licence applications in the light of LNG policy and draft LNG third party access rules, in consultation with the SSGC to ensure transmission capacity utilisation.
He said the draft third party access rules have been posted on Ogra’s website for comments which would soon be submitted by the petroleum ministry to the Economic Coordination Committee (ECC) of the cabinet for formal approval and implementation. He said the LNG price would be decided through negotiations between the buyers and sellers, which would obviously be lower than furnace oil to be economically feasible. In case of co-mingling of imported LNG with natural gas for sale to existing consumers, the government would have to give a separate pricing policy to ensure that domestic consumer prices did not go out of hand in view of much higher expected price of LNG.
As a statutory regulatory body, he said Ogra had so far issued three conditional construction licences for construction of LNG receiving terminals to Gasport Pvt Ltd, Global Energy Limited and Engro Corporation. A provisional licence has also been issued to Daewoo Shipbuilding and Marine Engineering Energy and Resources.
He said all the above mentioned conditional construction licences have the same terms and conditions without any discrimination or preferential treatment to any party. These licences are issued to facilitate the import of LNG in the country subject to satisfactory completion of all pre-requisites as laid down in the relevant rules.
He said the public hearing for construction licences has to be carried out within 90 days of the conditional licence issuance.
He said the hearing for Gasport Ltd had already been carried out while similar hearings would also be conducted by September for issuance of licences of Global Energies and Engro Corp.
He said the conditional licences did not give right to the said firms to undertake regulated activities until issuance of formal licences which is subject to public hearing and confirmation of the design and construction by a consultant of international repute that the requirements stipulated in the Ogra ordinance, LNG policy 2006 and LNG Rules 2007 have been followed.
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