LNG permit of three firms revoked


ISLAMABAD: The Oil and Gas Regulatory Authority (Ogra) has cancelled the permit of three companies because of their failure to take steps for import and sale of 1,400mmcfd of liquefied natural gas (LNG). Cancellation of terminal construction licences assigned to these private companies is also likely soon.

Pakistan Gasport Limited, Global Infrastructure Limited and Elengy Terminal Pakistan Limited (Engro Corporation) did not submit a $5 million performance bank guarantee and also didn’t fulfil six other conditions of a contract to import gas.

Ogra decided to cancel the 400mmcfd capacity allocation of Pakistan Gasport Limited, 500mmcfd of Global Infrastructure Limited and 500mmcfd of Elengy Terminal Pakistan Limited at a meeting on Thursday.

Later, the Oil and Gas Regulatory Authority, in a letter to the ministry of petroleum and natural resources, a copy of which is available with DawnNews, said: “Arguments of the companies for their failure to achieve the milestones and conditions are not tenable and their conditions precedent for progress of the project, including financial close, are hard to be met within next one or two years.

“Therefore, keeping in view [the] lack of progress and failure to meet the aforesaid milestone, non-compliance of capacity allocation conditions, and TPA rules, etc., by the project developers, the authority has decided to revoke the capacity allocation of said project developers forthwith. However, in future, if the said project developers show progress on their projects then pipeline capacity can be allocated afresh.”

The Ogra had on Oct 27, 2011 approved the natural gas pipeline capacity allocation of Pakistan Gasport Limited (400mmcfd), Global Infrastructure Limited and Elengy Terminal Pakistan Limited (Engro) under which the LNG firms were allowed to import LNG and transport imported gas through the transmission system of Sui Southern Gas Company Limited (SSGCL) and Sui Northern Gas Pipelines (SNGPL).

The regulator had issued these permission letters with certain conditions under “third party access rules” to the LNG firms.

The capacity allocation to the three companies was, however, subject to certain conditions/milestones with the provision that failure to achieve these goals will lead to cancellation of the allocated capacity.

According to the Ogra letter, the LNG firms were also required to pay the fees to the SSGCL and the SNGPL over the use of transmission system of the two state-owned gas utilities before the direct sale of gas to the power and industrial sectors.

The organisations were also required to purchase LNG from the local market and construct floating storage and re-gasification unit in Karachi. The SSGC was expected to lay a pipeline at a cost of $1 billion from Karachi port to the Sindh-Punjab border. Although their construction licences have expired, none of the firms has requested Ogra to extend the same.

The relevant sections of the Ogra letter read: “The LNG developers have failed to make any significant progress. They have yet not initiated construction of their terminal, no binding agreement has been signed with any potential consumer and no credible evidence has been provided about build-up of financial resources for the purpose.

“The government of Pakistan has indicated its intention to import LNG under integrated and tolling arrangements through gas companies which has also dampened the pursuit of LNG developers for private consumers.

“The capacity allocation was made for LNG business under third party access regime and when the government itself enters the business through import of LNG and buying of RLNG (regasified liquefied natural gas), the third party concept takes the back seat, rendering the pipeline capacity allocation unnecessary for a feasible future.”