The total power generation by RLNG reduced from 1492GWh in October to 670Gwh and 365Gwh in November and December respectively. One may say that the reduction is due to low load in winter, as total power production has reduced from 10,176GWh in October to 7,170GWh (November) and 7,762GWh (December).
However, on merit order, the RLNG plants should have been running while inefficient furnace oil (FO) based plants should have been rested. That was not the case in December where FO based power production stood at 2,251GWh in December against 649GWh in November.
The question is why did the merit order change. The reason for having RLNG as a preferred fuel option over FO is its higher efficiency and low cost. The fuel cost for RLNG plants for December is computed at Rs6.33 per unit versus Rs9.8 per unit for FO based plants.
Why was the 55 percent expensive FO option exercised? One theory is that PSO had earlier imported FO while the government at that time had decided to not operate FO based plants as not only new RLNG plants were supposedly operational but also the second RLNG terminal was commissioned in November.
But the lack of central planning resulted in undue imports of FO which subsequently has consumed in power generation. In the end, consumer will end up paying 55 percent higher tariff on 30 percent power production in December.
Who is responsible for this mess? NEPRA’s monthly hearing on the variation in fuel charges on approved tariff will be held in Islamabad tomorrow (25th Jan). Someone should take notice of the anomaly to question the authorities for eating consumer surplus due to their negligence or poor coordination.
This was the simpler part; there is more confusion to the story. In order to assert the actual situation, the need is to see how much RLNG was imported in the country during November-December. According to SBP data, RLNG imports were $46 million in December and $77 million in November versus an average $137 million imports in Mar-Oct. On the face of it, this may imply that RLNG is not imported in the last two months to exhaust FO inventories.
However, that might not be the case. According to the PBS, RLNG imports were $166 million in November and $175 million in December. The PBS numbers are way too high compared to the SBP’s, which is perplexing to say the least. There is either a new deferred payment mechanism in action or plain misreporting by one of the institution.
BR Research channel checks confirm that PSO paid $115 million in November for 5 cargos import in October, and paid $120 million in December for 5 cargos in November. And there are at least one or two cargos being imported per month by the second terminal which commissioned in November. Hence, the PBS numbers seem to be right.
Why are the SBP numbers too low for November and December? Also, where is the RLNG being consumed? Let’s find out how much could have been consumed in power generation. The RLNG based power generation was 670GWh and 395 GWh respectively in November and December. Back of the envelop calculations imply that the RLNG consumption in power generation at 40 percent efficiency was 176 mmcfd (November) and 104 mmcfd (December).
The import of RLNG was around 700 mmcfd each month based on five cargos of PSO import and two cargos by the second terminal. Some of the gas would have been consumed by industry in Punjab while the rest might be in storage.
The question is how much would be the RLNG consumption in January and subsequent months. The gas has to be imported as the payment has to be made to Qatar and wheeling charges have to be paid to terminals irrespective of actual handling. Hence, to justify fixed costs, RLNG must be imported.
Now where would the RLNG be consumed? Well, there is another problem in the chain. The whole idea of RLNG import is to provide gas to three highly efficient new power plants installed by Punjab and federal governments. The technology used in it is GE 9HA class turbine that has highest efficiency of 62 percent.
The only possible issue with the technology is that it is untested; and is not only showing teething problems (acknowledged by the PM) but BR Research channel checks confirm that some parts are in process of replacement. The real test would be when combined cycle run in 40 degrees plus temperature in peak summer. And imagine there is no FO stock to bank upon.
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