Pipeline capacities for LNG terminal sponsors ordered

Published May 28, 2021
Ogra and the CCoE have made it clear to the gas companies that under third party access rules, no customer or supplier could be bar­red from gas supply contracts. — Reuters/File
Ogra and the CCoE have made it clear to the gas companies that under third party access rules, no customer or supplier could be bar­red from gas supply contracts. — Reuters/File

ISLAMABAD: The Oil & Gas Regulatory Authority (Ogra) on Thursday directed the Sui gas companies — SNGPL and SSGCL — to immediately allocate pipeline capacities to the sponsors of two upcoming terminal of liquefied natural gas (LNG) for them to proceed with the final investment decision (FID) and financial closure.

In a joint letter written to the managing directors of SSGCL, SNGPL and the two LNG terminal developers, Ogra reminded that on Feb 23, 2021, the Cabinet Commi­ttee on Energy (CCoE) had already decided on the issue of pipeline capacity allocation to the developers.

As such, the regulator directed the gas companies to allocate around 250-300 million cubic feet per day (mmcfd) each to the sponsors of the two upcoming LNG terminal operators so that they can achieve financial close.

The regulator said that in order to facilitate the execution of two terminal projects all the relevant stakeholders had been invited for consultation sessions at three different occasions over past four weeks. Ogra further said the main issue which emerged during these sessions was the apprehension of gas companies that they would lose their high value customers.

In one of the meetings, Mitsubishi Corporation — the Japanese sponsors of Tabeer Energy Private Limited (TEPL) — put on record that the gas companies were threatening their customers of gas disconnections instantly if they committed gas supply contracts with new terminal operators. The Mitsubishi representatives said they could commit investment only when a written assurance was given that no anti-competitive practices would be applied and they would be allowed to operate in competitive environment and their customers would not be discriminated.

Ogra said it had a responsibility to implement and regulate third party access regime which was aimed at gas market liberalisation and creation of enabling regulatory environment for sustainable gas supplies.

The regulator said it had concluded the issue by specific directives to all stakeholders. It directed Energas Terminal Private Limited (ETPL) to formally apply as per applicable legal framework and submit draft template of access agreement to gas companies as per the Pakistan Gas Network Code. It said the ETPL presented the matter before Ogra but was advised to furnish complete formal request to SNGPL without any further delay. The EETPL agreed to implement immediately.

Regarding TEPL, the regulator said the company maintained its position that it was unable to provide any specific information related to their prospective customers and can only proceed with submission of draft access agreement without disclosing the details of their potential customers. TEPL also came up with a condition to proceed, suggesting that it should be provided assurance to serve all including existing consumers of Sui Company in a competitive market environment.

The regulator said that after having heard all and to facilitate the LNG Terminal Developers to achieve their FIDs, SNGPL and SSGCI are hereby directed to ensure compliance with the CCoE decision of February 23, 2021 whereby the companies were required allocate pipeline capacities of around 250-300 mmcfd each as indicated by LNG Terminal developers, to be utilised only after commissioning of their respective LNG Terminals.

It said the matter would be again taken up for expeditious conclusion, once the access agreements were finalised and duly initiated and submitted by the gas companies to Ogra.

The sources said that at a recent meeting, Minister for Planning and CCoE Chairman Asad Umar told the stakeholders that Prime Minister Imran Khan had warned that heads should roll over non-implementation of cabinet decisions of October last year for all facilitations to new LNG terminal sponsors who were making investments in merchant terminals without any burden on the government.

Ogra and the CCoE have made it clear to the gas companies that under third party access rules, no customer or supplier could be bar­red from gas supply contracts and that was actually at the centre of the reform programme to end monopoly and facilitate competition.

Published in Dawn, May 28th, 2021

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