LAHORE: Sui Northern Gas Pipelines Limited’s board of directors on Friday allowed a waiver of the minimum 66 per cent take-or-pay clause for three government-owned liquefied natural gas (LNG) power plants in Punjab in a bid to reduce the burden of capacity payments and increase the interest of both local and foreign investors in the government’s plan of privatising these projects.

The board also approved a proposal in principle for setting up another LNG terminal by a private firm at Karachi port.

Federal Minister for Energy Hammad Azhar appreciated the decision on Friday, claiming that it would help the government in reducing the capacity payments. In the long run, the SNGPL’s decision “will help in reducing capacity payments that the government has to pay power plants even when they are not supplying electricity”, he tweeted.

SNGPL okays proposal for setting up LNG terminal at Karachi port

In 2017-18, state-owned National Power Parks Management Company commissioned two combined cycle H9 technology power plants at Haveli Bahadur Shah in Jhang and Balloki in Kasur.

The projects, having a capacity of over 1,200 megawatts each, utilise regasified liquefied natural gas (RLNG) to produce electricity.

Before that, Punjab government-owned Quaid-e-Azam Thermal Power (Private) Limited also completed the 1,180MW gas-fired power plant in 2016-17 to implement the previous government’s agenda of taking the country out of an energy crisis under its short-, medium- and long-term strategies.

The completion of these plants added almost 3,600MW to the national grid.

Under the agreements, the SNGPL was liable to supply 600 million cubic feet per day of uninterrupted gas to these plants. On the other hand, the plants were liable to take a minimum of 66pc of their total gas demand or pay the cost (capacity charges) to the SNGPL at times when they are not in operation due to maintenance or when the country’s electricity demand is low.

Meanwhile, various long-term hydropower projects were also completed, including Neelum-Jhelum and Tarbela 4th extension projects, which almost ended the gap between power demand and supply in summer and resulted in surplus energy in winter.

After coming into power, the current government decided to implement its privatisation policy that also involved selling the Haveli Bahadur Shah and Balloki power plants. However, it couldn’t be done due to lukewarm interest from bidders who were reluctant to make bids due to the take-or-pay clause.

Now that the clause has been abolished, “the plants will be supplied gas as per their demand, which would help the government privatise its plants soon”, SNGPL’s Managing Director Ali J Hamdani told Dawn.

“It was the cabinet’s decision to abolish the take-or-pay condition to provide an enabling environment to bidders and reduce capacity charges. The SNGPL board agreed with this decision,” he said.

Published in Dawn, December 4th, 2021