The delay in gas supply to K-Electric’s 900-megawatt power plant may adversely impact the start of the project as the Oil and Gas Regulatory Authority (Ogra) has yet to notify the gas sale price.

Pakistan LNG Limited (PLL) and private power utility K-Electric have already signed a gas sale agreement for the 900MW power plant.

The Petroleum Division, in a summary, said that all civil/ electrical/ instrumentation works, laying of pipeline and establishing a metering station had been completed at the project site.

The pipeline has connected the power plant with Sui Southern Gas Company’s (SSGC) custody transfer station.

Now, the Petroleum Division is seeking approval of the Economic Coordination Committee (ECC), which is meeting on Friday, to issue guidelines to Ogra to notify the gas sale price.

The existing provision in the Ogra Ordinance 2002 and the rules made thereunder do not provide for the determination of consumer sale price of re-gasified liquefied natural gas (RLNG).

Therefore, in order to enable Ogra to determine the RLNG sale price, the fuel has been declared as a petroleum product under the Petroleum Products (Petroleum Levy) Ordinance 1961 and the rules made thereunder by including RLNG in the First Schedule list of petroleum products and including Sui Northern Gas Pipelines Limited (SNGPL) and SSGC in the Second Schedule list of companies.

Through an SRO, Ogra has been delegated powers to administer or establish the price of RLNG on behalf of SNGPL and SSGC.

Since July 2015, Ogra has been determining the price of RLNG for sale by SNGPL and SSGC to their consumers.

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The Cabinet Committee on Energy, in a meeting held on March 27, 2020, had considered a summary prepared by the Power Division and approved the allocation and firm supply of 150 million cubic feet of RLNG per day (mmcfd) according to the requirement shared by K-Electric through Pakistan LNG Terminals Limited (PLTL) and PLL from January 2021 to December 2025 at Ogra’s notified rates.

Subsequently, PLL approached Ogra for the determination of RLNG sale price for its supply to K-Electric.

However, Ogra advised PLL that the costs attributable to K-Electric, as per terms of gas sale agreement between K-Electric and PLL, were not admissible to be approved for the RLNG price under the current RLNG pricing regime, being not in accordance/ consistent with guidelines of the federal government.

As reported by PLL, all civil/ electrical/ instrumentation works, laying of pipeline and metering station have been completed at the project site.

K-Electric will now communicate the readiness of the facility for injection of RLNG through the said pipeline. It is anticipated to happen this month.

An interconnection agreement between SSGC and PLL is being finalised in parallel with the gas sale agreement between K-Electric and PLL before the commencement of RLNG supply.

In order to enable PLL to supply RLNG to the 900MW plant, the Petroleum Division proposed that the RLNG price should be determined as per contracts and existing guidelines.

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It proposed that PLL’s LNG import-related costs and port charges should be taken into account as per the existing guidelines. PLL’s margins should also be taken as per existing guidelines, it said.

All charges under the operation services agreement, including but not limited to capacity charges, utilisation charges of terminal as well as retaining charges should be considered as per existing guidelines.

It recommended that costs associated with the interconnection agreement between PLL and SSGC should be taken into account as per the agreement.

Any other costs under the operation services agreement between K-Electric and PLL should be taken as per the agreement including operation and maintenance fee for the metering setup.

Costs associated with the issuance of performance security by PLL to K-Electric should also be taken into account. It recommended that transmission loss should be determined and charged as per the existing guidelines.

Published in The Express Tribune, December 10th, 2021.

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