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Govt seeks to reduce supplies as demand for LNG fades – Newspaper

IN this file photo the first-ever ship of liquefied natural gas is entering the Port Qasim. The LNG throughput handled by PLL from Gasport Terminal would be reduced from 300mmcfd to 200mmcfd while PSO would reduce supply from Engro Elengy Terminal from 600mmcfd to 500mmcfd.

ISLAMABAD: Amid delays in the commercial operations of three mega projects of about 3,600 megawatts in Punjab, the government on Monday directed scaling down supplies of Liquefied Natural Gas (LNG) from both specialised import terminals as fuel demand faded.

Pakistan LNG Ltd (PLL) and Pakistan State Oil (PSO) have been directed to reduce their supplies by one-third and about 17 per cent, respectively, as domestic gas demand has dropped with higher temperatures, a senior official at the Petroleum Division told Dawn on Monday.

As a consequence, the LNG throughput handled by PLL from Gasport Terminal would be reduced from 300 million cubic feet per day (mmcfd) to 200mmcfd while PSO would reduce supply from Engro Elengy Terminal from 600mmcfd to 500mmcfd.

The official said the adjustments in LNG supplies had been made on the directives of the Prime Minister Office and would have a cost to PSO and PLL but would ensure that three signature plants do not look bad financially.

All the three LNG projects were required to achieve commercial operation date (COD) on combined cycle by December 2017 under revised schedule instead of original schedule of June-August 2017, but are yet to reach that stage, he said. One of the plants may achieve COD on March 7, he added.

He said the LNG off-takers were either not ready or a few others had lower requirement for LNG while pipelines and storages were fully packed and hence the only option left was to reduce throughput from both terminals.

The information flowed out after Prime Minister Shahid Khaqan Abbasi presided over a meeting on power sector demand and supply situation ahead of coming summer when the PML-N performance in terms of ending loadshedding would come to real test. This has become crucial for the fact that PML-N would not be in power in peak summer to manage power situation and unfriendly hands on machines could crumble the power sector success story.

The meeting was attended by Minister for Power Sardar Awais Ahmed Khan Leghari, Finance Adviser Miftah Ismail, Special Assistant to the PM Barrister Zafarullah Khan, federal secretaries senior officials of divisions concerned. The meeting was also “briefed on demand and supply situation and the power generation projections from March till October 2018”.

Interestingly, the LNG supply jack up was particularly based on power plants’ requirement. The Central Power Purchase Agency (CPPA) and National Transmission & Despatch Company (NTDC) have been giving gas demand of up to 900mmcfd, but actual consumption in the sector has been less than 500mmcfd.

For February, the power sector has been committing LNG offtake of 700mmcfd, but the supply remained less than 400mmcfd and some quantities were diverted to the domestic sector besides the industry.

Under revised schedules, the Petroleum Ministry official said the two LNG projects of the federal government namely Haveli Bahadar Shah and Balloki and Qaid-i-Azam Power Plant (Bhikki plan) of Punjab government have confirmed combined cycle commissioning in early March (all three having 1,200MW).

The three plants were to get firm supply of RLNG from December/January for combined cycle testing but they have so far failed to scale up supplies due to repeated technical failures.

In fact, the three were to start single cycle operations over one year ago for which two LNG terminals were set up and LNG import arrangements were put in place at the expense of millions of dollars of the taxpayer money. The plants were to make ‘take or pay’ payments to LNG importers under back-to-back agreements in case of non-consumption of RLNG even in single cycle phase.

However, the stakeholders in the supply chain have refrained from ‘take or pay’ settlement under orders of the PM Office to spread the losses across the chain instead of cost build up in LNG power plants to avoid Nandipur Power project-like cost escalations. The cost, therefore, shift to PSO, LNG companies and Sui gas companies besides the consumer at large. LNG terminal operators like Elengy and Gasport are qualified to claim full payments that increases the processing cost because of lower utilisation factor.

Interestingly, chief executive of Qaid-i-Azam LNG project Ahad Cheema was picked up by National Accountability Bureau (NAB) in a different case when his first plant at Bhikki was in final stage of testing and he had been entrusted to undertake fourth LNG project of 1,200MW at Trimmu when it had become clear that enough generation capacity had been contracted.

In the meanwhile, a number of low-cost generation project based on coal and hydropower have come on line like coal-based project at Sahiwal contributing 1,300MW, Port Qasim coal plant 600MW and expected to go up to 1,300MW soon. Additional nuclear power capacity of around 800MW is likely to be commissioned this summer while Tarbela-4th extension will give enhanced supplies in summer, followed by Neelum-Jehulm.

These low-cost projects would shift all LNG-based projects way down on merit order and compel these plants to full capacity utilisation in peak summer. “This is the story of unsustainable development taking place without proper coordination among various stakeholders”, said an insider.

An official statement said the Wapda chairman briefed the prime minister about the updated satiation vis-à-vis payments made so far to Punjab and Khyber Pakhtunkhwa against net hydel profit claims. He said Wapda had met all its net hydel payments obligations even when it had not yet received the funds from CPPA after determination by National Electric Power Regulatory Authority.

“The prime minister directed that factual position be presented before the Council of Common Interests during its next meeting”, said the statement. He also directed Power Division to brief the Federal Cabinet on current and anticipated power situation in its next meeting.

He also directed that the minister for power to personally visit and take provinces on-board for taking effective measures for reducing electricity losses and improving recovery situation of power dues.

Published in Dawn, March 6th, 2018

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