ISLAMABAD, Sept 12: The government is expected to dedicate proposed Liquefied Natural Gas (LNG) imports for power sector and use its import cost as pass-through item in consumer-end electricity tariff with back-to-back guaranteed arrangement for payments to LNG importers.

A senior government official told Dawn on Wednesday that a sub-committee of the ECC had concluded its recommendations which would be presented to the Finance Minister Dr Abdul Hafeez Shaikh for clearance before it could be brought up before the forthcoming meeting of the ECC for approval.

“The ECC is expected to clear the transaction early next week,” the official said. The only decision it has to make now on the report of sub-committee was whether the LNG import cost should be recovered by increasing average consumer prices of natural gas or the LNG should be treated like any other fuel as pass-through item in the power tariff, he said.

He said the overwhelming opinion of the committee members was that like natural gas, furnace oil, diesel or coal, the LNG by all means fell under the definition of fuel which should be treated as pass-through item in power tariff.

The official said most of the members did not agree with the recommendation of the prime minister’s adviser on petroleum Dr Asim Hussain that LNG and LPG airmix should be inducted in the national gas transmission system by affecting proportionate increase in the average price of gas for gas consumers.

“Whatever quantum of LNG is inducted into the gas system would be dedicated to the power plants against a wheeling charge to the gas utilities and then passed on to the power consumers,” he said.

He said a number of power plants were lying idle because of non-availability of gas or expensive furnace oil and about 4000mw of existing or upcoming projects could absorb more than 500mmcfd (million cubic feet per day) of LNG. Therefore, there was no reason to burden natural gas consumers.

The official said that law ministry had also informed the government that even the original LNG import plan struck down by the apex court on transparency issues also provided for sovereign guarantees for LNG import and there was problem with providing guarantees under the fresh import structure from any legal standpoint.

The ECC in its meeting in the first week of August had constituted a technical committee comprising the secretaries of petroleum, finance and water and power and the deputy chairman of the Planning Commission and chairman of the Board of Investment to work further on the mechanism, bidding details, guarantee matters and legal issues before the project was cleared for bidding.

The ECC had not approved the LNG import saying it was not yet clear in how many stages and how much prices of natural gas and power would need to be increased if LNG started flowing. The official, however, explained that LNG imports would not be possible under any circumstanced during the coming winter because of time limitations even though private sector could be encouraged for sport purchases.

The petroleum ministry has recently sought approval to fresh set of proposals involving short- and long-term import of LNG on emergency basis seeking $900 million worth of rolling guarantees or sovereign guarantees for LNG imports.

As a short-term solution, the petroleum ministry believed that LNG could be imported by Sui Gas utilities in four-five months once allowed to do so. For this, it presented an LPG terminal purchased from private sector to import LNG under the umbrella of the federal government.

The terminal company jointly owned by two gas utilities would act as purchaser or aggregator while the two gas utilities would be off-takers on its existing LPG terminal by retrofitting.

While the PNSC will be given the responsibility for shipping LNG, the ministry of ports and shipping and other related agencies would grant permissions to allow LNG imports at existing terminals.

The Sui companies would responsible for development of a re-gasification LNG (RLNG) terminal subsequently duly equipped with requisite facilities through a joint venture for a second terminal on competitive basis. Both the terminals will be compensated through a tolling charge to be determined by competitive basis and to be approved by Oil and Gas Regulatory Authority (Ogra).

The Joint Venture of Sui companies would procure LNG directly from international competitive bidding and would be authorised to represent government of Pakistan where supplies are arranged on the basis of government-to-government negotiations such as with Qatar, Brunei, Algeria and others.

Government guarantees as advised by the ministry of finance will be available for purchase of LNG while SSGC/SNGPL will purchase RLNG from the aggregator on back-to-back basis.

The RLNG will be delivered by terminal operator at SSGC’s on-shore delivery point from where a pipeline would transmit the gas to the existing transmission network in the national grid and then provided to power plants whose revenue would be directly paid to the supplier instead of this revenue going in the accounts of power plants.

For long-term, aggregator would invite private companies including existing capacity holders and terminal construction licence holders to bid for supply of RLNG and construction of LNG terminal and sell it to utilities or bulk consumers directly.

The government will provide necessary sovereign guarantees in case RLNG is purchased by utility companies. This long-term project could commence RLNG supply in 30 months once the process of approval is complete but that may be implemented by the coming government.