Misgovernance! Not that the power sector already had enough of it, the issue keeps popping its ugly head from every nook and corner in no time. The country’s depleting gas resources and heavy reliance on expensive furnace oil is being addressed with imported Regasified Liquefied Natural Gas (RLNG) in what has been the best option for immediate relief to the power sector. Pakistan is currently importing LNG from Qatar and Italy and is also on the lookout for more government-to-government deals. However, after the whole LNG deal with Qatar initially became a topic of debate, it looks like the LNG imports in the country are now attracting criticism.
This time around, the issue seems to be building on the underutilisation of LNG terminals. It must be noted that the three key power plants on imported RLNG in Punjab worth 3,600MW namely Bhikki, Haveli Bhadur Shah and Baloki have seen delays and have not been producing electricity up till now. All the three projects were to achieve commercial operation date (COD) by December 2017 as per the revised schedule. While the Haveli Bahadur Shah LNG-based power plant has just been announced to start running at the highest efficiency, the delays in these projects have resulted in lower demand for LNG than anticipated.
Lower demand should mean lower imports of RLNG. However, it’s not that simple; though the government had earlier directed the scaling down of supply from both the LNG terminals (Pakistan LNG Limited (PLL) and Pakistan LNG Terminal Limited (PLTL)); the terminals have had to face heavy penalties while canceling the cargoes already planned for consumption by the RLNG based power plants.
Unfortunately, many are linking the rise in circular debt to the delay in these three key RLNG projects, and rightly so; while the canceling of the cargoes has triggered penalties, the underutilisation of the terminal capacities has also sparked demurrages, liquidated damages, and losses in the overall energy value chain.
At the same time, the cost of electricity for the consumers has also gone up due to increased cost of imported LNG that is regasified and processed here. This includes the terminal charges of handling and regasifying LNG that have gone up from e.g. $0.4177 for PLL to $1.1671 per unit. OGRA has lately also penalised PLL Rs560 million over canceling the import of four LNG cargoes in the last five months, declaring its supply chain inefficient.
If that wasn’t enough, the terminals have also been rumoured to be using the funds of Government Holding Private Limited (GHPL) that are primarily to be used for local oil and gas production and not imports. How far this is true, one will have to wait and see; but it looks like that RLNG business has also started to contribute to the country’s rising receivables.
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