Delay in construction licences mars LNG terminals development

Published March 21, 2021
Delay in the grant of construction licences by the Oil and Gas Regulatory Authority (Ogra) and finalisation of the Gas Transportation Agreement (GTA) by the state-owned Sui gas companies are holding up progress on the development of the two new liquefied natural gas (LNG) terminals. — WorldBulletin.net/File
Delay in the grant of construction licences by the Oil and Gas Regulatory Authority (Ogra) and finalisation of the Gas Transportation Agreement (GTA) by the state-owned Sui gas companies are holding up progress on the development of the two new liquefied natural gas (LNG) terminals. — WorldBulletin.net/File

LAHORE: Delay in the grant of construction licences by the Oil and Gas Regulatory Authority (Ogra) and finalisation of the Gas Transportation Agreement (GTA) by the state-owned Sui gas companies are holding up progress on the development of the two new liquefied natural gas (LNG) terminals.

Ogra has already issued LNG marketing licences to Energas and Tabeer. However, the companies claim that the regulator is now delaying grant of construction licences which is preventing them from taking final investment decisions on their respective projects.

Energas is formed by a consortium of companies including Lucky Cement, Sapphire and Halmore Power while Tabeer is supported by Mitsubishi. Both companies plan to import gas on a take-and-pay basis for their customers in the private sector but are struggling to obtain regulatory and other approvals for the last five to six years, according to the managements of the two firms.

“Ogra has asked us to sign the GTAs first with Sui Northern Gas Pipelines Ltd (SNGPL) and Sui Southern Gas Company Ltd (SSGCL) before it issues the licence,” a senior executive, who requested anonymity, told Dawn on Saturday.

He alleged that the public-sector gas utilities are using different excuses to delay GTAs without which neither of the two private companies could take their final investment decisions on terminal development. “Unless we have a construction licence and GTA from the gas utilities, we cannot import and sell gas despite confirmed demand from our customers.”

He said the SNGPL and SSGC managements were scared of taking decisions because private competition would break their monopoly on the market besides being afraid of the National Accounta­bility Bureau (NAB). He contended that private competition could deliver LNG to the power sector at 10 per cent lesser price than the government sector.

Industry sources say the terminal tariff of the projects being set up for import of gas by private sector for sale to private industrial and other consumers would potentially be substantially lower than the two existing operators whose capacity is underwritten by the government on a ‘take-or-pay’ basis.

Both the companies are also trying to negotiate with the government to auction the existing spare terminal and pipeline capacities to them to enable them to start importing LNG cargos for their power and industrial customers.

On the other hand, both the existing terminals operated by Engro and Pakistan Gasport are seeking permission from the gas utilities to expand their existing regasification capacity from 690mmcfd and 750mmcfd to 900mmcfd each to bring more LNG cargos for direct sale to their industrial and other customers without any government guarantees.

“The rising gas shortages in the country require significant expansion in the existing RLNG capacity. The new terminals will take two to three years to develop; in the interim, the government can boost the LNG supplies by allowing us to increase our capacity,” an Engro Energy executive said.

The executive said gas companies were not permitting expansion in their existing RLNG capacity despite approvals from the Economic Coordination Council (ECC) back in October.

He said the country needed a new terminal every year not only to boost gas import capacity but also to reduce pressure on the existing ones for safety and other reasons.

Currently, the average utilisation rate of the existing terminals is 84 per cent compared to the global average of around 40pc. Hence, he pointed out, the government also needs to expand the existing pipeline through completion of the North-South gas pipeline project to transport their gas to Punjab where the most demand exists. “No new terminal can take off without increasing the pipeline capacity,” the executive added.

Published in Dawn, March 21st, 2021

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