The compressed natural gas (CNG) industry has sought allocation of long-term terminal and pipeline capacity in an effort to attract viable suppliers for liquefied natural gas (LNG) import at competitive rates.

In this regard, Universal Gas Distribution Company (Pvt) Limited (UGDC) – a special purpose company – was set up five years ago with approval of the Economic Coordination Committee (ECC) for LNG import for the CNG sector while bearing financial risk.

The Pakistan Tehreek-e-Insaf (PTI) government has framed third-party access rules, which allow the private sector to import LNG.

UGDC has already signed agreements for the utilisation of excess LNG terminal and pipeline capacity which are not being implemented.

At present, state-owned Pakistan LNG Limited (PLL) is importing LNG on a spot basis, which is expensive, and the private sector is forced to consume it. The government is also bearing financial risk on LNG imports.

After the private sector imports LNG, it will also bear the financial risk.

In a letter sent to the ministries concerned, UGDC has requested them to allocate terminal and pipeline capacity on a long-term basis in order to attract suppliers at competitive rates.

UGDC said that it was not a new customer as it was already consuming 150 mmcfd of gas and therefore wanted to import LNG on its own at cheaper rates. Under the plan, UGDC is to maintain a price difference of 30% compared to petrol rates. However, the CNG industry is now forced to consume gas being imported by PLL on a spot basis.

Therefore, UGDC is looking to import LNG at competitive rates to maintain price difference between gas and petrol.

Terminal capacity allocation on a short-term basis could not support the sector and it would be impossible for the private sector to attract customers/ viable LNG suppliers on a short-term basis, UGDC said in the letter.

It was of the view that it would defeat the purpose of taking on board the private sector in order to contribute to the LNG supply chain with the objective of easing the risk and burden of circular debt on the government and sharing the cost of imports.

UGDC CEO Ghiyas Abdullah Paracha said that the CNG sector in Punjab and Sindh was already consuming 150 mmcfd of RLNG by utilising the existing terminal and pipeline capacity. No additional capacity has been sought. Only 2% to 3% new CNG stations may be added.

He added that the CNG sector must achieve a petrol-CNG parity of at least 30% for sustaining its business through its own imports and passing on the benefit of cheaper gas to the people.

Paracha added that it would not only benefit the CNG sector but would also reduce the import bill of liquid fuels.

UGDC will bring its cargo and PLL/ Sui Southern Gas Company (SSGC) will only provide regasification services at a cost that does not include components pertaining to investment, risk, etc since the investment, risk and all other financial obligations will be the responsibility of UGDC.

Published in The Express Tribune, January 26th, 2021.

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