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ISLAMABAD: Faced with an extensive glut amid an economic slump, Pakistan is considering reducing its long-term liquefied natural gas (LNG) imports next year through re-negotiations with Qatar to reduce financial and technical liabilities.
This emerged on Friday at a public hearing called by the National Electric Power Regulatory Authority (Nepra) on the request of the Central Power Purchasing Agency (CPPA), which is seeking more than Rs3.41 per unit additional fuel cost adjustment (FCA) from consumers of ex-Wapda Distribution Companies (Discos) to mop up about Rs42 billion against electricity sold in May.
This coincided with a about 5pc increase in the regasified LNG (RLNG) price notified by the Oil & Gas Regulatory Authority (Ogra). With up to 15pc transmission and distribution losses of Sui gas companies, Ogra fixed the RLNG sale price at $14.4 per million British thermal unit (mmBtu) for June, compared to $13.75 per mmBtu in May.
During the public hearing presided over by Nepra Chairman Waseem Mukhtar, the Nepra members raised questions over the violation of economic order, resulting in higher fuel cost to consumers, mainly because of higher utilisation of imported LNG at Rs24 per unit instead of substantially cheaper coal-based electricity at Rs11.7 per unit on local coal and Rs16.8 per unit on imported coal.
The Nepra members expressed displeasure over the situation. They enquired about gas pressure line packs repeatedly reported by local gas companies, resulting in the closure of cheaper domestic gas fields and expensive imports instead and any possibility of re-negotiations for long-term LNG contracts.
RLNG prices raised for June
CPPA’s chief executive officer, Rehan Akhtar, explained that higher LNG consumption was a contractual obligation. He said Pakistan would be importing about $7bn worth of LNG by December this year under a long-term contract with Qatar. “We had to consume higher than desired LNG quantities to avoid demurrages and international penalties,” he said, conceding that cheaper coal-based power generation capacity was available but could not be utilised.
The power companies would have paid the price of coal-based generation and the penalties for the unutilised LNG quantities. The cumulative impact would have been higher than the cost of LNG consumption.
He said that the LNG import schedule was based on electricity demand for May estimated in January, but the variation in actual demand resulted in the closure of domestic gas fields as electricity consumption dropped by 5pc due to weather conditions.
He said all the relevant stakeholders were concerned over the LNG import and foreign exchange losses at the cost of closing domestic resources.
Published in Dawn, June 29th, 2024
