The caretaker government is set to enforce the agreement signed between Pakistan LNG Limited (PLL) and Pakistan GasPort Consortium Limited (PGPCL), which focuses on utilizing the surplus capacity of an LNG terminal. This action pledged to be completed by September 17, 2023, is anticipated to pave the way for the private sector to import LNG.
Under the agreement, PGPCL was permitted to use its surplus terminal capacity to import LNG, a move projected to lower the capacity charges from $0.4177 to $0.383647 per mmbtu. Despite the benefits, the agreement remained untouched during the previous government’s tenure, inadvertently shifting the capacity payments burden onto the consumers.
In light of potential international arbitration hinted at by PGPCL, the caretaker government has vowed to implement the agreement by the specified date, thus potentially revitalizing the private sector’s ability to import LNG.
Private Sector’s Role in Revamping Pakistan’s LNG Landscape
The ongoing conflict with the government has been a hurdle for the private sector in their attempts to import LNG since 2015, with the state-run gas utilities obstructing their efforts. However, Iqbal Z Ahmed, Chairman of the Associated Group, a PGPCL subsidiary, voiced readiness to initiate one LNG cargo import every month starting in October to cater to the private sector’s demands. During a conference in Singapore, he communicated with several LNG suppliers and emphasized the prospects of more economical LNG imports than those determined by the Oil and Gas Regulatory Authority (Ogra).
Ahmed also assured that the imports would occur without government guarantees, tackling concerns regarding Letters of Credit (LCs), and delineating potential clientele, including the CNG and small-scale industries.
Experts predict that this move could foster further investments and market expansion in Pakistan, an essential development given gas’s pivotal role in the country’s energy framework. It is expected to alleviate the rising levels of circular debt in the energy sector, attributed to the government’s previous involvement in the LNG business. Ogra has delineated a transportation tariff to support this transition to encourage private sector participation in the LNG market.
