Govt leans towards new LNG terminal amid energy crisis

Published June 24, 2021
The government appears to have made up its mind to facilitate a new LNG terminal replacing an existing one for maintenance to avoid international litigation. — Reuters/File
The government appears to have made up its mind to facilitate a new LNG terminal replacing an existing one for maintenance to avoid international litigation. — Reuters/File

ISLAMABAD: The government appears to have made up its mind to facilitate a new LNG terminal replacing an existing one for maintenance to avoid international litigation and probe reasons behind delayed decision-making in contract management and fix responsibility.

Informed sources told Dawn that based on deliberations of a meeting presided over by Prime Minister Imran Khan, the minister for law and justice would present a way forward to the Cabinet Committee on Energy (CCoE) at its meeting on Thursday.

The law minister has personally heard viewpoints of almost all stakeholders of the LNG supply chain, including public and private sector entities, on the subject, examined the LNG supply agreements (LSAs) and related matters and a detailed position would be placed before the CCoE.

The CCoE meeting to be presided over by Planning and Development Minister Asad Umar would take up two major issues — updates on LNG terminals and North-South Gas Pipeline project — besides reviewing implementation status of closure of some old power plants and a report on the LPG situation.

“There has been exchange of more than 60 letters between the parties — Sui Southern Gas Company Limited ((SSGCL) and Engro Elengy Terminal Limited (EETL) — on dry docking of the Floating Storage & Regasification Unit (FSRU), since January 2019,” a senior official said.

Obviously, somebody or some people have been sleeping on it that needs to be explained and the persons identified. Also, someone has to answer if Qatar was not closed due to Covid-19 where Exquisite FSRU of US firm Accelerate was to be inspected and repaired, then who was responsible for ensuring the terminal to leave Port Qasim.

No official word came out of the meeting held at the Prime Minister Office, but officials said the relevant ministries were asked to investigate these matters and take them to a logical conclusion. It was felt that contract management and enforcement weaknesses should be addressed on a permanent basis.

Informed sources said a couple of SSGCL officials, who were opposed to dry docking of FSRU Exquisite on June 29, had already been sidelined.

The officials said the maritime affairs ministry was opposed to dry docking of Exquisite for being demanded for preventive reasons and should be delayed until August when demand is to come down in Ashura holidays. However, it contended that immediate release could only be allowed for corrective or emergency reason, which was not the case.

However, it was also noted that inspectors of Class Society had done in situ inspection of FSRU in March this year and concluded that it was not possible to delay it beyond July 10 and only then the US firm and Engro had given a panic call to SSGCL on March 30.

The Petroleum Division is reported to have explained that it had been left with the worst case scenario to deal with an eventuality but it also has to be kept in mind that expiry of the certification of FSRU, non-availability of its insurance or refusal of any incoming LNG ship to be unloaded at the terminal could also have serious consequences. It also has to be examined in totality as if all these questions are to be addressed at the International Court of Arbitration and what could be the possible outcomes, it was advised.

It had also been put on record that the Port Qasim Authority (PQA) had already allowed Engro on June 16 to replace the existing terminal with new one. LNG pumping during this period would remain completely shut for two days and then gradually build up to 92 per cent on the 7th day i.e. July 5.

The officials said that while the Power Division mentioned lower than required gas supplies, the Petroleum Division questioned the backup plan for power generation for 15pc shortfall in gas supplies for only two days. It was reported that 600 million cubic feet per day gas would not be available for just two days out of 3,800mmcfd of total gas supplies, but there was no arrangement in place to run 13 furnace oil-based plants being paid capacity payments.

The authorities were asked to move quickly and plan to minimise loadshedding till July 8-9 until dip in Tarbela power generation gets back to normal.

The Petroleum Division said it could not provide less than 350mmcfd LNG to three major power plants to avoid liquidity damages as firm demand from the power sector was 500mmcfd and the division was providing 700mmcfd to power plants even though requirement may be higher.

The sources said furnace oil and diesel arrangements were in place to make up for the shortfall over the next few days and no further imports may be required in the short run as per the power sector’s demand projections.

Published in Dawn, June 24th, 2021

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