Plan to increase capacity to regasify LNG in jeopardy

The business plan of Engro Elengy Terminal Private Limited (EETPL) to increase its capacity to regasify LNG is in jeopardy as SSGC has opposed it on account of host of reasons, including the NAB’s investigation into the ‘illegal award of contract’ of the LNG terminal-1 to EETPL.

Plan to increase capacity to regasify LNG in jeopardy

Unless and until the NAB clears EETPL from its investigation on illegal award of contract of LNG Terminal-1, it cannot be allowed to implement its business plan to increase its capacity to regasify LNG and market the additional capacity to interested private parties under the Third Party Access PTA provision.

“And more importantly, the arrangements for setting up Pakistan’s first LNG import terminal were PPRA compliant and were finalised on Fixed Term, Fixed Capacity and Fixed Levelized rates and involved the cost of the entire LNG infrastructure, not just the FSRU. And any modification in this structure for increasing the capacity to re-gasify will be in violation of PPRA and may be termed as an illegal activity,” says SSGC in its position paper.

The EETPL informed on 23 Jan 2019 regarding the planned dry-dock of FSRU in the year 2020 and intended to further invest and debottleneck the FSRU to increase its re-gas capacity up to 750-780 MMscfd (million cubic feet per day) with peaking up to 850-900 MMscfd, to market this additional re-gasify capacity to interested third parties subject to Third Party Access provision under LSA (LNG Supply Agreement).

In its position paper on Third Party Access to EETPL terminal, SSGC says that it is important to mention that EETPL terminal is a government dedicated terminal having all of its capacity fully booked by a government entity (SSGC) and thus currently there is no excess capacity available at the FSRU. The position paper says that SSGC time and again approached the Ministry of Energy and raised its concerns and observations on the issue of Third Party Access to EETPL LNG terminal.

The SSGC also mentions in its position paper that NAB investigation with regard to the illegal award of LNG terminal-1 contract to EETPL is still unconcluded, which would make the TPA process questionable and raise potential questions on the transparency of the whole process.

Moreover, in case of TPA implementation, there shall be amendments needed in LSA and its ancillary agreements, which have already been submitted to the investigation agency. Therefore, reopening the valid contracts at such a stage or entering into a new contractual arrangement involving EETPL would only invite the attention of NAB towards an already controversial issue and may be termed as an illegal activity.

The position paper also says that NAB has also approached the Ministry of Energy through letter written on March 4, 2020 to inquire about any consent being awarded to EETPL and their viewpoint on the proposed terminal expansion, which verifies the concerns of SSGC involved in proceeding with terminal expansion/TPA to EETPL terminal.

The SSGC also built it argument, while mentioning about withdrawal of 66 percent guaranteed off-take by federal government for RLNG based power plants in Punjab, saying that ECC had approved the uplift of obligation of 66% guaranteed off-take of RLNG volumes by NPPMCL, which reflects unavailability of firm downstream customers of regasify LNG volumes.

On the contrary, the Government of Pakistan (GoP) is intent to commence the allocation of excess capacity to Third Party on the government dedicated LNG import terminals, which may result in increase of liabilities at public sector entities.

The SSGC understands that OGRA exercises the authority to issue Third Party Access rules for LNG terminals, however, the same are not yet in place. The process for formulating and issuing the aforesaid rules would require ample time.

Therefore, it may be noted that the process for TPA cannot be initiated prior to the finalization of the said rules and other necessary documentation, and subsequent requisite OGRA approval for EETPL.

Originally published at The news international