The Cabinet Committee on Energy (CCOE) on Friday allocated pipeline capacity up to 600mmcfd to two new LNG terminals to lock $800 million worth investment and open market for the private sector.
At present, state companies have monopoly in the gas market.
After the decision CCOE’s, the gas market will be open for multiple buyers and customers effective from January 2023.
Sources told The Express Tribune that 250-300mmcfd pipeline capacity to each terminal developer will be on a three months rolling basis with effect from January 1, 2023.
However, any other party except these two LNG terminals would be able to make a bid for pipeline capacity.
These two LNG terminals are also said to achieve commercial operation date (CoD) by end of 2023. However, the government had sought date of commercial operations and financial close from these two new LNG developers.
Officials said that it would also provide opportunity to consumers to have cheaper LNG as the market would become competitive.
Officials have termed this decision as a ‘game changer’ for the gas sector that would ensure competition in gas market.
They further said that Energy Minister Hamad Azhar gave assurance that they had taken all gas companies on board to develop consensus to allocate pipeline capacity to two new LNG developers to lock $800 million investment.
CCOE appreciated the Petroleum Division for reaching consensus on allocation of pipeline capacity to two LNG developers – Tabeer Energy and Energas.
TAPI gas will be cheaper than imported LNG, NA panel told
These two LNG developers had demanded allocation of 400mmcfd capacity each. However, CCOE considered that allocation of 300mmcfd capacity would be sufficient to operate these two LNG terminals.
CCOE also discussed the summary submitted by the Power division on policy direction for operation of RLNG plants out of merit. The meeting instructed that for ironing out the operational problems arising due to import of RLNG.
The Minister of Energy will have a meeting with the Oil and Gas Regulatory Authority (Ogra) and National Electric Power Regulatory Authority (Nepra). The solutions and the proposed way forward will be shared in the next meeting of CCOE.
Earlier, the CCOE had freed three LNG-based power plants from guaranteed offtake of LNG. This decision will be applicable from January 2022. However, these gas supply agreements would be still valid.
During the meeting, CCOE considered that if government companies import LNG to feed these LNG-based power plants and they do not lift, then who would bear losses.
CCOE considered whether consumers should pay the loss or distribution and gas companies should bear it. Now, this would be decided in the next meeting after consultation with Nepra and Ogra.
A meeting of the CCOE was held under the chairmanship of Federal Minister for Planning, Development, and Special Initiatives Asad Umar on Friday.
CCOE approved the summary submitted by the Ministry of Maritime Affairs on the report of the Inter-Ministerial Committee on the Establishment of New Terminals.
The CCOE discussed the report in detail and approved the allocation of pipeline capacity. The chair directed to fast-track the work on setting up new LNG terminals.
The Power Division submitted a summary on restructuring of Pakistan Electric Power Company (Pepco), which was approved by the CCOE. The major restructuring proposals approved include; change of the nomenclature from Pepco to Power Planning and Monitoring Company (PPMC); HR functions of the company delegated to the respective companies; the restricted company will continue to charge a fee to distribution companies, generation companies, and NTDC; the restructure company will approach Development Finance Institutions (DFIs) and multilateral agencies to solicit support for capacity building; composition of the board of directors of the company will be changed and the restructuring plan will be implemented by December 31, 2021 and new HR will be hired for the company forthwith.
The CCOE reviewed the Circular Debt Report August 2021 submitted by the Power Division. The committee appreciated the fact that the increase in circular debt during the last 12 months is only Rs57 billion, which shows a sharp reduction in comparison to Rs450 billion per year inherited from the previous government.
Published in The Express Tribune, October 9th, 2021.
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