Allowing the private sector to import liquefied natural gas (LNG) is under serious consideration by the Petroleum Division. Private-sector players have approached the government seeking permission to import gas to meet idle capacity of LNG terminals at competitive rates. Minister for Petroleum Ghulam Sarwar confirmed to Business Recorder that the government is likely to allow private sector to import LNG. He said the government would consult all stake holders involved in LNG business in this respect.
Recently, Trafigura Pakistan (Pvt) applied for the grant of licence to carry out regulated activity of sale of LNG. The applicant stated that it will procure LNG from international market to regasify it at Pakistan Gas Port Consortium Limited Terminal and then transport it through Sui Southern Gas Company Limited (SSGCL) network to end consumers, initially CNG stations.
Oil and Gas Regulatory Authority (OGRA) invited all stakeholders and general public to furnish their comments, suggestions, and intervention. The petition is pending before the regulator. In March 2018, an energy company approached the Federal Board of Revenue (FBR) for removal of a major disparity in payment of taxes between the government and private sector on import of LNG. The case is also pending in the FBR.
The company proposed that as per Income Tax Ordinance 2001, one percent tax is levied on a government designated LNG importer, previously only Pakistan State Oil (PSO) and PLL, whereas importers from private sector are required to pay 5.5 percent tax. This disparity discourages private investments because it creates significant cash flow strain on private supply chain by increasing operating capital requirements leading ultimately to increased cost of fuel supply to consumers.
The government paid an additional $45 million in 2018 due to un-utilised capacity of LNG terminals and is expected to bear an extra cost of $40 million in the ongoing year. The regulator of LNG terminals - Pakistan LNG Terminals Limited (PLTL) - recommended to the government to allow the private sector to utilise the idle capacity of LNG terminals for smooth supply of imported gas.
In January 2019, Pakistan LNG Terminals Limited recommended to the Petroleum Division to allow private sector to import LNG through amendments in regulatory, contractual and operational rules. The copy of the letter is available with Business Recorder which states that LNG import tariffs and terminal charges can be made cost-effective by allocating idle import capacity to the private sector.
According to a letter written by Pakistan LNG Terminals Limited, idle capacity is approximately $ 45 million cost that is passed on to the end consumers annually. The same cost is projected for the current year. The Pakistan Muslim League-Nawaz (PML-N) government had agreed to pay $272,000 and $245,220 per day as capacity utilisation charges, irrespective of the usage, to Engro Elengy Terminal Pakistan Limited (EETPL) and Pakistan LNG Terminals Limited (PLTL) respectively.