The Cabinet Committee on Energy (CCOE) has approved a proposal for conducting an independent assessment of port charges on liquefied natural gas (LNG) vessels for better rates.

A meeting of the committee, chaired by Federal Minister for Planning, Development and Special Initiatives Asad Umar, was held on Thursday.

The Petroleum Division informed the cabinet body that the Port Qasim Authority (PQA) was collecting 300% higher charges from LNG vessels compared to regional ports. Two state-run energy companies – Pakistan LNG Limited (PLL) and Pakistan State Oil (PSO) – had pointed out earlier that LNG vessels were still facing problems in navigating despite collection of $47.5 million in port charges by the PQA.

They were of the view that though PQA had collected $47.5 million, it did not spend the funds on development of infrastructure such as the navigation channel to handle LNG vessels. The Petroleum Division said that PQA first reduced the towage rate from $5.913 to $4.199 per gross registered tonnage (GRT) on February 1, 2017 and then to $3.706 on June 13, 2018.

However, these reductions were not applied retrospectively from March 2015 with the result that PQA overcharged the towage cost from 2015 to 2017. The Petroleum Division proposed that the towage rate should not be more than $2 per GRT.

The CCOE considered the proposal of reducing port charges based on an independent assessment. The proposal also emphasised the need for development work at Port Qasim. The CCOE approved the proposal of conducting an independent assessment for better rates. The committee noted that rationalisation of various port charges would benefit the end-consumers, through a reduction in the LNG cost.

The CCOE directed the Ministry of Maritime Affairs to immediately start infrastructure development work by using the financial resources available with PQA.

The committee noted that the improvement in port infrastructure and facilities should be the main priority of PQA. The Petroleum Division informed the cabinet body that the Channel Development Cess (CDC) was collected on the first 200 LNG carriers for channel widening and dredging.

PQA communicated that it would continue charging the CDC until complete recovery of its investment cost. However, the investment/project cost and update on dredging and widening of the channel was not provided by the PQA.

The Petroleum Division said that the passage of LNG vessels in the channel was adversely affecting the movement of other ships. All traffic in the channel stops when an LNG vessel is moving.

Due to the unavailability of night navigation, the charter cost is affected, which is ultimately reflected in LNG prices.

PQA is receiving port charges for handling imported LNG vessels, which are among the most expensive in the region. Main components of port charges are pilotage, towage and CDC. Pilotage charges stand at $3.706 per GRT and CDC is $100,000 per vessel.

Total charges per LNG cargo range from $600,000 to $750,000, which are 300% more than the average in other regional ports. These charges contribute to an increase of approximately Rs7 in the LNG price.

Published in The Express Tribune, March 5th, 2021.

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