Price determination was one of the prerequisites to the supply agreement
The Oil and Gas Regulatory Authority (Ogra) on Wednesday finally set a provisional price for liquefied natural gas (LNG) in the larger public and national interest.
The price was determined despite several deficiencies in the LNG import process and this development will pave the way for a $21-billion LNG supply deal with Qatar.
The determination of the price was one of the pre-requisites to the long-term LNG deal. It is likely that officials from the petroleum ministry will fly to Qatar in the next few days to finalise the deal.
The Ogra decision comes as a blow to the LNG terminal operator, Pakistan State Oil (PSO) and gas companies that were making money from the consumers by charging different prices.
PSO has paid $58 million to the LNG terminal operator at the rate of $1.4 per million British thermal units (mmbtu) but Ogra has allowed a tariff of $0.66 to the terminal on the supply of 11 cargoes.
Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) had also charged 28 cents and 52 cents per mmbtu respectively in transmission fee which the regulator has disallowed.
Earlier, the Ministry of Petroleum had set a provisional price subject to adjustment by the regulator.
Now, the gas companies and the LNG terminal operator would have to adjust the revenue collected from the consumers.
The regulator has noted various deficiencies in LNG imports from Qatar on spot purchase basis. Ogra said the information provided by PSO had been evaluated and it was observed that the LNG framework was suffering from fundamental shortcomings.
“A long-term LNG supply agreement with Qatar is necessary but it has not been signed yet,” an Ogra official said.
The regulator said a tripartite agreement, which regulates the supply chain between PSO, SNGPL and SSGC, had also not been signed. It noted that an agreement with the end-consumers had also not been provided, despite PSO being required by law to provide details that LNG activities were governed under the tripartite agreement.
The regulator has set the price of LNG at $8.63 per mmbtu and reduced the PSO’s margin.
PSO had suggested the price in the range of $10.35 to $11.42 per mmbtu, when the average LNG price stood at $7.72 per mmbtu.
PSO had demanded a 4% margin approved by the Economic Coordination Committee, but the regulator allowed only 1.82%. The authority had also disallowed administrative margins of gas companies up to $0.05 per mmbtu.
Additionally, gas companies have been barred from recovering service charges from the consumers.
Talking to The Express Tribune, All Pakistan CNG Association leader Ghiyas Paracha said now the price of CNG would come down by Rs4 per kilogramme. He hailed the Ogra’s decision and said the current price of CNG was Rs59 per kg and it would come down to Rs55 per kg following the LNG price determination.
Published in The Express Tribune, October 8th, 2015.
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