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ISLAMABAD: A private sector firm, Universal Gas Distribution Company (UGDC), was allowed on Wednesday to import or purchase liquefied natural gas (LNG) from suppliers and sell it to compressed natural gas (CNG) stations across the country for vehicular consumption.

A formal licence has been issued by the Oil and Gas Regulatory Authority (Ogra) to UGDC for sale of natural gas for an initial period of 10 years.

The company is a joint venture created by CNG operators led by All Pakistan CNG Association (APCNGA) Chairman Ghiyas Abdullah Paracha.

This is the first time that a private sector firm had been allowed to sell imported LNG to consumers — a business currently in the monopoly of the two gas utilities, namely the Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines Limited (SNGPL).

This came following a letter of comfort issued by the federal government to the UDGC for import and sale of 75 mmcfd (million cubic feet per day) of LNG through spare processing capacity at the Engro LNG Terminal in December.

Mr Paracha, who is also the company’s CEO, said the licence was issued after his firm efforts of almost 19 months and completion of the entire legal process. “Ogra also vetted legal framework, conducted public hearings and conducted third-party audit before approval. UGDC can now import LNG or buy it from any government or private entity to sell it to consumers,” he said.

Ogra said it issued the licence for sale of natural gas to UGDC under sections 22 and 23 of the Ogra Ordinance and Natural Gas Regulatory Authority Rules “to undertake regulated activity of sale of natural gas to consumers”.

Under the licence, the company will transport natural gas from transmission and distribution network of integrated gas companies (SSGCL and SNGPL) under the terms and conditions of Gas Transportation Agreement (GTA) under third-party access regime, rules and law.

“UGDC will be exclusively responsible to purchase/arrange LNG and re-gasify at EETPL’s terminal or any other terminal with prior permission of Ogra through finance arranged in accordance with SECP [Securities and Exchange Commission of Pakistan] applicable regulations, being a commercial transaction,” Ogra said, adding: “SNGPL and SSGCL will enter into GTA strictly in accordance with the applicable government policies, applicable law and allocations after satisfying technical and financial modalities.”

The UGDC will be required to obtain services of gas utilities for billing and metering under the mutually consented services agreement until and unless it sets up its own metering and billing system to the satisfaction of the regulator.

UGDC Chairman Iftikhar Ahmad and CEO Paracha welcomed the decision, saying it would promote investment and improve investor confidence to help end energy crisis and revive an otherwise struggling CNG sector. “This is the first ever attempt by a sinking industry to bail out itself. It will become a case study in the business schools around the world,” said Mr Ahmad, a retired brigadier.

Thousands of closed CNG stations in Punjab would be revived through uninterrupted supply of gas through the network of Sui companies according to existing rules and regulation which will be 30 per cent cheaper than petrol, Mr Paracha said.

He said the sale of domestic gas to CNG stations would continue to be under prices approved by Ogra while LNG-based sale of gas would be completely independent and based on commercial terms and yet 30 per cent cheaper than petrol.

He said the move would reduce oil import bill, cut urban pollution, provide jobs to many and bail out the sinking CNG industry in which people had invested over Rs350 billion.

Responding to a question, Mr Paracha said the UGDC was now authorised to arrange and sell LNG under 2011 LNG policy purely on a commercial basis. He said the UGDC was in the process of securing LNG from PSO that would be transported using the existing system of gas utilities at a charge. Government taxes would then be added to fix a price for consumers.

Now, the CNG stations located in residential areas would be empowered to move out their outlets and would also be allowed to use electricity generators in case of power failure which is currently prohibited because of their location.

He said the government had allowed them 75 mmcfd of LNG in the first phase, even though demand was more than 300 mmcfd. He said the priority would be secure 75 mmcfd share out of LNG being imported by the government through Qatargas. However, in case the government was able to sell all these quantities to the power sector, the UGDC was also in contact with other suppliers.

He said the gas utilities had shared a GTA draft with the UGDC for transportation charges other modalities, but this could not be signed in the absence of the licence that had now been issued by Ogra.

Published in Dawn, February 25th, 2016

Comments (16) Closed

Red Dawn Feb 25, 2016 11:05am

Good initiative. Generates income for SSGL & SNGL and taxes for government.

Shabbir Kazmi Feb 25, 2016 12:09pm

One can term it another scam. In the presence of two gas distribution companies granting permission to PSO or any other company to import LNG is crazy. The entities granted permission to import LNG will have to use the existing transmission and distribution networks of gas distribution companies. There is massive leakage and pilferage of gas, my question is who will take the hit, LNG importing companies or gas distribution company? How it will be determined the exact quantities have been injected into the system?

Just Someone Feb 25, 2016 12:45pm

UGDC should also consider importing LNG from USA. They have completed their LNG export terminals and have just started shipping. Natural Gas and LNG prices in the US are one of the lowest in the world and it may turn out to be beneficial for us. Moreover swapping of LNG cargoes purchased from the USA with similar cargoes purchased from nearer locations may also save on transportation costs.

Thinker Feb 25, 2016 12:54pm

Please, Please also invest in Research & Development on CNG kits, CNG engines and safety of these equipment to ensure that in Pakistan to ensure sustainable and productive, economical and safe use of the natural resource.

Today our cars are ill equipped both in terms of safety and output or power produced by our cars that are not fully optimized for CNG fuel.

Just Someone Feb 25, 2016 12:55pm

@Shabbir Kazmi : Why do you have to be skeptical of everything good that is happening. Moreover, majority of your questions are off the mark.

SSGCL and SNGPL do not have the experience to import energy products. PSO has that requisite experience. SSGCL and SNGPL have the experience for laying gas pipelines and distributing gas. So once LNG has been re-gasified and their experience is pertinent in its distribution. Once the quantities have been injected in the system of SSGCL and utilized through SNGPL through gas swap agreements, there will be less loss and pilferage due to shorter transport distances. The average loss and pilferage cost will be borne by UGDC as the cost of transportation. Any additional cost should be borne by SSGCL and SNGPL as responsibles for gas distribution infrastructure.

Just Someone Feb 25, 2016 12:58pm

@Shabbir Kazmi : The real concern at this moment in time should be that as per agreement with Qatar gas, we will be receiving 3.75 million tons of LNG (approx. 525 million cubic feet of gas per day) starting from Q2 2017. By that time our second LNG terminal should be ready. Else we will have a lot of gas coming to us through agreements with various suppliers without the capacity to offload and re-gasify it.

Waseem Feb 25, 2016 03:22pm

@Shabbir Kazmi Do we ever learn what PSO, SSG and SNG have played havoc to industry sector. Any private arrival between those three lazy operators is welcoming indeed. and main pilferage is not on the main transportation network, rather through distribution network and consumers. CNG stations will have their dedicated pipelines, so any such pilferage is a risk of USG

Shabbir Kazmi Feb 25, 2016 03:49pm

I don't wish to enter into any debate nor I am a decision maker. I have raised a few questions for the kind consideration of policy makers/decision makers and for the debate by those who have little knowledge of the industry, capabilities/inadequacies of the companies involved. The successive governments have failed in protecting state owned companies SSGC and SNGPL. If these are facilitated in recovery the situation would have been different. The governments have also been keen in extracting bulk of the income of exploration and production companies as dividend. If any one has a doubt he/she should look at the number of wells drilled. In Pakistan less than two dozen rigs are working, whereas in the US the number of installed rigs is over 1,600. Tell the nation whom to blame?

msadiq Feb 25, 2016 03:53pm

Great, this will bring in private investment, competition and broaden the skill base plus revenue for the government.

Be Realistic Feb 25, 2016 04:03pm

Now that would be a revolutionary step indeed as CNG stations are wasting a precious resource of natural gas at the cost of industrial and domestic consumers!!!

M. Anwar Qureshi Feb 25, 2016 04:04pm

WILL it be cheaper than the govt imported gas and sold in the market on competitive basis not insisting on 30% cheaper than petrol.........if there is a fair competition with the govt the prices should come down more. If this happens successfully, the govt import bill of petrol will significantly reduced.

M.Saeed Feb 25, 2016 06:14pm

Another lopsided initiative for a prolonged period! When petrol price is about Rs.70 per liter, how can CNG survive the price war after introducing another middle-link of exploiter? An ordinary consumer would tell that, even at present price, CNG is already costlier to run petrol vehicles, than the petrol.

M.Saeed Feb 25, 2016 06:31pm

It should be the duty of the all too inquisitive media to dig-out, who is the real hand behind the private sector firm, Universal Gas Distribution Company (UGDC)? This sudden emergence of a firm out of the blue and its getting juicy licence for 10 years, is too much of an abnormality to comprehend as clean and normal.

AMIR BANGASH Feb 25, 2016 07:20pm

A positive step and hope it will help to over come energy shortages.

multani Feb 26, 2016 10:20am

Someone should check bank accounts of all these backers of UGDC. How come they have so much money and bank support to sign multi million LNG import contracts? I am not even talking about the money required after import. These people should be handed over to LTU for proper audit. CNG mafia is presenting a rare opportunity to be served justice with. Alas! the mafia has another backer i.e. govt. Its a good thing we are too inept to exploit our natural resources. One day, in distant future, when other countries lack it, we will have plenty of them as well as honest people. Dark days never last an eternity.

Bilal Feb 27, 2016 02:05pm

Good initiative. Let the private sector run the show. More competition, less corruption and better services for the end user.

Public sector entities like SNGPL, PIA, Steel Mills are not sacred that they mist be defended. They might have been great once, but past few decades they have only looted this country with their corruption and inefficiency.