The Petroleum Division has decided to approach the Economic Coordination Committee (ECC) against "injustice" of the Oil Gas Regulatory Authority (Ogra) against Sui Southern Gas Company Limited (SSGCL) with respect to RLNG-related UfG, well-informed sources told Business Recorder.
Giving the background, the sources said that in the backdrop of swapping natural gas in lieu of RLNG being imported/injected into M/s SSGCL system due to unavailability of dedicated 1,200 MMCFD capacity RLNG pipeline (due to non- issuance of ROW notifications by the local administration under the provincial Land Acquisition Act), reduced offtake by the Power Division and the management of winter gas load-shedding by injection of RLNG for use by the domestic consumers in SNGPL's franchise area, the Economic Coordination Committee (ECC) in its meeting held on May 5, 2018 considered the summary submitted by the Petroleum Division and approved the proposals with effectiveness retrospectively from March 1, 2015 .
The summary was as follows;(i) M/s SSGC may be allowed UfG based RLNG handling basis (volumetric basis) in the sale price of RLNG in the form of distribution loss due to swapping arrangements and consumption of RLNG in its franchise area in partial modification of summary of June 14, 2016 "distribution loss to be determined and charged at actual cost including losses due to swapping arrangements and consumption of RLNG in SSGC franchise area (determined on volume handled basis, ie, metered system gas in and metered system gas out) . The said loss for the customers located on high pressure transmission lines as well as those customers who are willing to lay their dedicated line from SMS/TBS as their own cost) shall also be determined and charged at actual. However, for other customers on distribution lines an actual average UFG for the last financial year will be taken in determination; (ii) M/s SNGPL and SSGCL be allowed to manage gas loads on their system through RLNG-system gas swap mechanism for which necessary provision of volumetric adjustment and financial impact may be made on cost neutral basis in the sale purchase of RLNG on a multi-year and ongoing basis through setting up of deferral account by Ogra and ;(iii) Cabinet Division in consultation with Ogra may process the amendment in Ogra Ordinance, 2002 to cover the entire LNG/RLNG supply chain in its regulatory framework, ie, from licencing to pricing of RLNG.
The ECC also decided that Ogra can come back to the government in case it has also initiated the implementation of guidelines for which Ogra was required to take into account the technical and financial impact of increase in SSGCL's UfG owing to injection of RLNG in its franchise area and was also required to allow financial impact to be recovered from RLNG consumers until such time the dedicated RLNG pipeline is fully operational and no gas swap arrangement is in place in lieu of injection of RLNG in M/s SSGCL system so as to avoid recurrence of this phenomenon.
The sources said, as per the ECC approved policy guidelines Ogra has been determining the sale price of RLNG on monthly basis whereas M/s PSO is notifying it. The pricing of RLNG is ring-fenced activity under Petroleum Product (Petroleum Levy) Ordinance, 1961 and as such all the cost of supply of RLNG is recoverable from RLNG consumers/buyers. Ogra determined the weighted average sale price of RNL for the LNG imported by M/s PSO and M/s PLL.
The flow of RLNG from first LNG terminal of M/s EETPL commenced in end March 2015, however, necessary infrastructure was non-existent at that time to transmit the RLNG from Port Qasim, Karachi to Lahore where intended consumption centres are located. Accordingly, keeping in view this operational constraint at that time, it was decided that for the time being to utilize the existing volume swapping capacity of the transmission and distribution network of both the Sui companies whereby imported RLNG is to be utilized within Sindh and equivalent energy units in indigenous gas are transferred to M/s SNGPL by M/s SSGCL from various indigenous gas fields. Meanwhile, it was decided to construct a dedicated 1200 MMCFD capacity pipeline with a length of 1100 kilometers to transport RLNG from Port Qasim Karachi to Lahore.
The project was conceived in two phases, ie, RLNG-1 and RLNG-II. Both the companies raised financing of the RLNG-1 phase, respectively whereas government provided sovereign guarantee against commercial borrowing for undertaking the RNLG-II phase of the project.
The entire pipeline project was required to be completed and commissioned by end December 2016. However, a portion of 42x400 meters (Jamshoro) out of 340 kms project of SSGCL's franchise area was put on halt which belonged to a sitting Provincial Minister who was unwilling and reluctant to permit the pipeline construction activities to take place within the boundaries of his land. However, lately in September 2018, SSGCL completed the remaining segment and line was fully commissioned. But swapping continues to remain an operational/circumstantial constraint of M/s SGCL for retaining certain amounts of RLNG due to the following two reasons;(i) non-issuance of Right Of Way (ROW) notifications by the provincial administration for laying of 30x125 km pipeline for bringing indigenous gas back to Karachi from the indigenous gas fields namely Nainat Basal, Kauser, Gambat South and KPD thus limiting SSGCL's ability to meet gas demand of Karachi and its surroundings for supply to its customers including K-Electric and for operational/system use; and (ii) sudden reduction of RLNG off-take by power plant in SNGPL's franchise area and consequent reduction of in-take of RLNG by SNGPL in its system.
As of the today the LNG terminal, ie, M/s EETPL and M/s gas Port Pakistan are operational with the government contracted total terminal capacity of 1200 MMCFD. Most of RLNG is transmitted through dedicated RLNG pipeline to M/s SNGPL, however, some portion is retained and consumed in M/s SSGCL system which is to be swapped with indigenous gas.
Before the commissioning of dedicated RLNG pipeline, M/s SSGCL was fully consuming all RLNG into its distribution network at Karachi and was diverting indigenous gas to M/s SNGPL in lieu thereof. Due to difference of Gross Calorific Value (GCV) hearing value and specific gravity of the RLNG and indigenous gas, the commingled utilization of gas within the M/s SSGCL system resulted into higher Unaccounted For Gas (UFG) specifically in Karachi region and this inflicted financial burden on SSGCL due to non-recovery of the impact. M/s SSGCL approached Ogra in the light of ECC approved guidelines and presented its case duly supported by technical data but the request of SSGCL was turned- down. M/s SSGCL was of the view that OGRA's officials acknowledged the issue highlighted by SSGCL but in order to ascertain the magnitude of its impact Ogra intends to engage third party technical consultant, the cost of which will be borne by the SSGCL's financial statements for the FY 2017-18, yet to be finalised, which is dependent upon the determination of final revenue requirement for the year by the Ogra.
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