CONSUMERS face the prospect of ominous blackouts next month owing to the closure of two gas fields in Sindh, the drop in hydropower from dams and furnace oil shortages. The matter is complicated because of the insistence of one of the two RLNG terminal operators, Engro Elengy, to pull out its FSRU (floating storage and regasification unit) from June 29 for maintenance when electricity demand is at its peak. The withdrawal of the terminal will force the shutdown of RLNG-based plants, exacerbating the power supply gap. The company will replace its FSRU with a bigger vessel but resumption of RLNG supplies will take at least 10 days. In case of a glitch it may take even longer. What alternative would the cash-strapped government have to cover the generation deficit during that period? It would have to stop gas supplies to sectors like fertiliser and purchase expensive LNG spot cargoes to operate RLNG-based plants, and/or use more expensive furnace oil. Or it can opt for massive blackouts at the expense of its popularity.

In any case, the economic and financial cost to both government and consumers will be formidable. Therefore, the government wants Engro to delay terminal maintenance — dry docking — for a few months when RLNG demand for generation recedes and the power shortfall becomes manageable, or coincide the vessel replacement with the planned shutdown by gas companies. Engro’s refusal isn’t surprising. At this point, the replacement vessel will cost the company way less than what it has to pay in colder months. It also fears risking payment of a premium on its insurance cost if maintenance is deferred further. The operator says it couldn’t carry out FSRU maintenance in May last year — the period it had intimated to the government in 2019 — because of Covid-19. Apparently, Engro will defer maintenance if the government shares the cost of delay. Or does it want to put pressure to secure third-party access for its terminal, which will help it expand its regasification capacity for sale of LNG to private buyers? The matter must be investigated since the maritime affairs ministry has accused Engro of violating the terms of agreement and jeopardising the country’s energy security. It wants penalties to be imposed on Engro. If the company has breached its contract or failed to complete dry docking last year for its own reasons (like saving money on replacement vessel charges in winter), neither the government nor the consumers should be made to pay.

Published in Dawn, July 23rd, 2021

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