Govt may amend 2nd schedule of petroleum levy ordinance

Islamabad: The Federal Government is likely to amend Second Schedule of Petroleum Products (Petroleum Levy) Ordinance, 1961 aimed at including the name of PLL in it and allow Oil and Gas Regulatory Authority (Ogra) to determine RLNG price on behalf of the company for 900 MW RLNG-fired plant of Karachi Electric (KE), sources close to Secretary Petroleum told Business Recorder.

Sharing the details, the sources said, the ECC on June 14, 2016 while considering the recommendations made by the constituted committee approved the revised policy guidelines to Ogra for determination of sale price of Re-gasified Liquefied Natural Gas (RLNG).

Pursuant to these guidelines, Ogra has been determining the RLNG sale price on monthly basis.

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Petroleum Division maintains that the existing provisions in the OGRA Ordinance, 2002, and the rules made there under, do not provide for determination of consumer sale price of RLNG; therefore, in order to enable Ogra to determine RLNG sale price, RLNG was declared a petroleum product under Petroleum Products (Petroleum Levy) Ordinance, 1961 and the rules made there under by way of inclusion of RLNG in First Schedule ‘the list of Petroleum Products’ and inclusion of name of M/s SNGPL and SSGCL in Second Schedule.

Ogra was delegated the power to administer or establish the price of RLNG on behalf of M/s SNGPL and SSGCL. Since June, 2015, Ogra is determining the price of RLNG for sale by SNGPL and SSGCL to their consumers only.

The sources said Cabinet Committee on Energy (CCoE) in its meeting held on March 27, 2020 while considering a summary submitted by the Power Division approved the allocation and firm supply of 150 MMCFD RLNG or as per the requirement shared by KE, through Pakistan LNG Terminals Ltd (PLTL)/ Pakistan LNG Ltd (PLL), effective from January 2021 to December 2025 at Ogra notified rates.

Subsequently, M/s PLL approached Ogra for determination of sale price of RLNG in respect of its sale to KE. However, Ogra advised PLL that costs attributable to KE as per the terms of Gas Sales Agreement (GSA) being executed between KE and PLL are not admissible to be recovered from RLNG price under the current RLNG pricing regime being not in accordance/ consistent with guidelines of the Federal Government.

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According to the Petroleum Division, as reported by PLL, all civil/ electrical/ instrumentation works, laying of pipeline and metering station have been completed at the site. KE 900MW power plant’s pipeline connecting with SSGCL’s Custody Transfer Station (CTS), as well as, tie-in activity has been completed. KE will now communicate the readiness of facility for injection of RLNG through the pipeline. This is anticipated by the first week of October, 2021.

It has been reported that GSA between KE and PLL has been finalized while an Interconnection Agreement (IA) between SSGCL and PLL is also being finalized in parallel before RLNG supply to the plant could commence.

The sources maintained that in order to enable PLL to supply RLNG to KE’s 900MW power plant and finalize its RLNG sale transaction, Petroleum Division has proposed the following: (a) amendment to the Second Schedule of Petroleum Products (Petroleum Levy) Ordinance 1961; (i) pursuant to Section 7 of the Petroleum Products (Petroleum Levy ) Ordinance, 1961, Federal Government except for Fifth Schedule can amend the schedules of the Ordinance by notification in official gazette; therefore, name of PLL may be included in the Second Schedule or Ordinance and OGRA may be delegated the power for establishing/ administrating RLNG price on behalf of PLL. For this purpose, an SRO has been drafted for vetting by the Law Ministry prior issuance by Petroleum Division.(b) determination of Sale Price of RLNG: (i) LNG DES price to be taken as per contract(s) as per existing guidelines; (ii) PLL’s LNG import related costs and port charges to be taken at actual as per the existing guidelines; (iii) PLL’s margin on LNG to be taken as per the existing guidelines; (iv) all the charges under Operation Services Agreement (OSA) including but not limited to capacity charges, utilization charges of terminal, as well as, retainage to be taken at actual as per the existing guidelines; (v) terminal management fee at actual as per the existing guidelines; (vi) costs associated with interconnection agreement between PLL and SSGCL to be taken as per the agreement; (vii) any other costs under the GSA between KE and PLL to be taken as per the agreement including Operation and Maintenance (O&M) fee for the metering setup; (viii) costs associated with issuance of performance security by PLL to KE under Heads of Agreement (HOA); and (ix) transmission loss to be determined and charged at actual as per existing guidelines.

Copyright Business Recorder, 2021