ISLAMABAD, June 23 -- The liquefied natural gas (LNG) import programme is facing major hiccups as the Oil and Gas Regulatory Authority (Ogra) has decided to cancel the pipeline capacity allocated to LNG importers after taking the petroleum ministry into confidence because of the failure of the importers to meet commitments within the set timeframe.
In October 2011, Ogra had allocated pipeline capacity to three LNG project developers, allowing them to use the pipeline network of state-run gas distribution companies for transporting 1.4 billion cubic feet per day (bcfd) of imported LNG to consumers.
A senior government official told The Express Tribune that Ogra, in a letter written to the petroleum ministry, had revealed its intention of cancelling the pipeline capacity allocated to the LNG importers including Global Energy of Turkey, Pakistan Gas Port and Engro Corporation.
The importers have failed to meet project requirements within the stipulated period of six months. "They have not even found global buyers as yet," said the official.
According to him, the petroleum ministry had been involved in the whole process of allocating pipeline capacity to the LNG importers, prompting Ogra to take the ministry on board before going ahead with capacity cancellation.
Owing to the delay, an influential LNG lobby was trying to seek an extension in the deadline for financial close relating to the pipeline capacity, a petroleum ministry official said. Financial close is the completion of documentation process and preparation of a satisfactory business model.
According to an understanding reached with the government, the LNG importers were expected to enter into financial arrangements, agreements with LNG suppliers and gas buyers by the end of April, but they could not be able to achieve these.
In its recent decision on revenue requirements of gas utilities, Ogra also rejected the demand for billions of rupees made by Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Limited (SNGPL) for laying LNG infrastructure due to slow progress to meet commitments made by the importers.
Earlier to press ahead with the project, the government had asked SSGC and SNGPL to invest $1.2 to $1.4 billion in laying new pipelines and create room for LNG suppliers. At present, SSGC has the capacity to transport 500 million cubic feet of LNG per day.
Global Energy had committed to bring first consignment of 500 mmcfd by the end of June, followed by Engro bringing the same quantity in December 2012 and Gas Port importing 400 mmcfd in the first quarter of 2013.
At the time of allocating pipeline capacity, Ogra had warned LNG importers of capacity cancellation and seizure of bank guarantee if they failed to bring gas within the set timeframe.
The ministry had proposed bank guarantee of $35 million to be furnished by LNG importers, but at the time of allocating pipeline capacity, the amount was set at $10 million. Later, it was further reduced to $5 million, the ministry official said.
However, the LNG importers, who had to furnish bank guarantee within 90 days of capacity allocation, defaulted on this commitment as well and no company deposited even the reduced amount of $5 million, the official added Published by HT Syndication with permission from South Asian Media Network. For any query with respect to this article or any other content requirement, please contact Editor at email@example.com
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