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New LNG terminals will follow a B2B model: minister

  • Measures will enhance the capability of the system to handle imported gas but in a cost-efficient manner

The new LNG terminals, according to Minister of Energy Hammad Azhar, would be based on a Business-to-Business (B2B) model and will have no take-or-pay responsibility on the government, unlike earlier facilities.

These changes will improve the system’s ability to manage imported gas while being cost-effective, he noted.

After the retirement of SAPM for Power and Petroleum Tabish Gauhar, who was backing the replacement of Engro’s current FSRU with a larger FSRU while opposing new LNG terminals on the grounds that most nations only have two LNG terminals, permits for new LNG terminals have been accelerated. He was reportedly forced to resign by “an important faction” in the Cabinet.

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Minister for Energy, who recently undertook a visit to Russia, further tweeted that the government is moving fast towards finalising details of PakStream gas pipeline project (formally called North-South pipeline) with the Russian counterparts.

In parallel, the government has facilitated the allocation of pipeline capacity firm offer to two upcoming terminals, Hammad Azhar claimed.

On October 8, 2021, Cabinet Committee on Energy directed Sui Companies to allocate capacity to both the new LNG terminals, after Ministry of Maritime Affairs (MoMA) accused both Sui Companies of using delaying tactics in allocation of pipeline capacity to the two new LNG terminal developers, well informed sources told Business Recorder.

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Sharing the details, the sources said that the Federal Cabinet on April 2, 2019 ratified the decision of ECC of March 27, 2019 and directed Ministry of Maritime Affairs (MoMA) to expedite the process for establishment of the 3rd LNG terminal in view of the imminent shortage of gas in the country. Later, Cabinet Committee on Energy (CCoE) on March 26, 2021 directed MoMA to immediately deliberate on the issues delaying establishment of new LNG terminals in the inter-ministerial committee under the chairmanship of Minister for Maritime Affairs.

The committee short-listed all the outstanding issues and suggested the way forward for each of them. The first inter-ministerial meeting was held on December 12, 2019, co-chaired by Minister for Maritime Affairs Syed Ali Haider Zaidi, Minister for Energy Omar Ayub Khan and SAPM (Petroleum) Nadeem Babar to facilitate the new terminal developers with respect to regulatory approvals required by M/s Tabeer and M/s Energas.

Subsequently, fifteen inter-ministerial meetings were held from December 2019 till August 2021. In the first meeting till date the forum managed to resolve all pending approvals/ NOCs. However, there are still some contentious issues, which require intervention of the CCoE.

The first issue relates to pipeline capacity allocation and gas transportation agreement with Sui Companies.

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According to MoMA, the Federal Cabinet on September 20, 2020 while considering the summary titled “establishment of LNG terminals at Port Qasim” directed the Petroleum Division to allocate pipeline capacity in the existing and new planned pipeline within 30 days. Further, Oil & Regulatory Authority (OGRA) in its letter of May 26, 2021 also directed Sui Companies to allocate 300-350 MMCFD of the pipeline capacity to the M/s Energas and M/s Tabeer Energy each, but after the lapse of more than three months Sui Companies remain reluctant to allocate the pipeline capacity.

Taking serious view of flouting the order of the regulator, OGRA wrote another letter on September 2, 2021, sternly directing the Sui Companies to allocate the pipeline capacity to the new LNG terminal developers in order to carry out the compliance of CCoE directions.

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There was a general consensus, except SNGPL, that there is capacity in the pipeline available for the new LNG terminal developers. The Regulator concurred with the general consensus. The break-up is as follows: (i) total pipeline capacity of SNGPL- 1200 MMCFD; (II) long-term contract till 2024- 1000 MMCFD; (iii) gas being provided to K-Electric – 150 MMCFD ;(iv) gas being provided to SSGC- 250 MMCFD; and (v) available pipeline capacity- 1200 MMCFD.

SSGC has agreed to allocate the pipeline capacity to both the new LNG terminal developers as per their requirements.

The sources said, SSGC was directed multiple times to allocate the existing land/ plot to the new LNG terminal developers to construct their tie-in-point and fire-fighting station may be built on new leased land on the same terms and conditions as the earlier two existing LNG terminals, but SSGC has been delaying its land lease agreement with LNG terminal developers.

According to MoMA, the narration clearly depicts that the Sui companies seem averse to deregulate the gas market despite the fact that substantial quantity of gas is being pilfered from their systems, adding to the circular debt of gas, which runs in billions of rupees. Gas sector, like Aviation & Banking may be deregulated in order to reduce the burden on exchequer and save tax payers money.

MoMA has proposed that as directed by the OGRA, SNGPL must allocate 250-300 MMCFD pipeline capacity to each of the new LNG terminal developers. SSGC should provide the land for the establishment of fire-fighting station & tie-in-point to the new LNG terminal developers on the same terms & conditions on which the tie- in- points were allocated to the earlier existing terminals. Both new LNG terminals developers should sign the Gas Transmission Agreement (GTA) with SSGC and SNGPL within 15 days. The new LNG terminal developers should close their FIDs within 60 days of signing of the GTA.

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