Government not to provide any guarantees to LNG importers

The government has decided not to provide any guarantees to importers of Liquefied Natural Gas (LNG) and directed LNG buyers and sellers to determine commercial arrangements. According to official documents available with Business Recorder, the government is considering providing Re-gasified Liquefied Natural Gas (RLNG) transportation alone to importers.
"The importers of LNG requested the government for a guarantee or assurance, arguing that this is required as the end users ability to pay for the LNG cargo is questionable in view of circular debt", the document added. Oil and Gas Regulatory authority (Ogra) is expected to shortly issue rules, the framework for ascertaining the "first come first serve" criterion and allocation of capacity stipulated in Third Party Access (TPA) Rules.
The stakeholder will be allowed to offer comments/suggestions to Ogra on TPA Rules within 48 hours. Ogra will then issue the draft TPA Rules to interested parties on request and place the draft on its web site. This was decided in a recent meeting chaired by Dr Asim Hussain, Federal Minister for Petroleum and Natural Resources, also attended by Secretary Petroleum, Joint Secretary Finance and other relevant officials.
The meeting decided that LNG importers would be facilitated under the one window operation concept and comprehensive facilities would be provided on first come first serve basis. The bidders would be allowed to participate in partnerships. Successful bidders would have to find LNG buyers on their own; however, the government would facilitate when requested.
Applicants informed the government that Independent Power Plants (IPPs) are major customers of RLNG and prevailing circular debt has hampered their liquidity, which would be a major hurdle in using RLNG, therefore a government guarantee was sought. The government informed the stakeholders that keeping in view the prevailing gas shortfall and resultant load management in the country adversely affecting the economy an aggressive timeline of June 2012 has been set after detailed deliberations. However, parties offering timelines beyond the specified date will also be given consideration on merit.
Sui Southern Gas Company Limited (SSGCL) is expecting to have initially an entry and exit capacity of 500 mmcfd RLNG, supply of which must commence in first or, at the latest, the second quarter of 2012. The development of an interconnection from entry point at LNG terminal to the nearest specified entry point in SSGCL transmission system will also be laid and developed by the investor.
Dr Asim Hussain in the meeting announced the formation of a task force with the objective of ensuring speedy implementation of LNG imports, and assured that a level playing field will be provided to all LNG suppliers to meet the rising energy requirements of the country. He added that the task force was part of the LNG Policy 2006, and would act as a "one-stop-shop" to address all issues concerning LNG import projects, including the interpretation of policies and regulations.
The meeting also dwelt on subjects relating to issues relating to the pipeline system, pricing and minimisation of wastage. The task force would be headed by Secretary Petroleum, and other members would include Additional Secretary of Finance, representatives from Defence, Industries, Production, Ports and Shipping Divisions, a representative of Ogra, Member Customs FBR, Chairman of the concerned seaport authority, Director Generals of the concerned EPA, Coast Guards and Maritime Security Agency and Commander Karachi or COMCOAST Gwadar.
The import of Liquefied Natural Gas (LNG) is being considered under a TPA regime in order to bridge the severe gas supply-demand gap in the country. SSGCL has invited submissions of Expression of Interest (EoI) from companies interested in capacity allocation in SSGCL gas transportation system. Such companies must be willing to develop their own LNG FSRU, arranging their own supply of LNG and having their own buyers of RLNG which may also include the Sui companies. Interested companies shall confirm that they will be able to satisfy reasonable technical and commercial criteria as specified by SSGCL and Ogra under the prevailing LNG policy and TPA rules. The SSGC has reportedly received a tremendous response from local and international suppliers to its invitation for the import of LNG under TPA.