Private firms are reluctant to enter into an agreement with Pakistan LNG Limited (PLL) for the utilization of around 30 percent unutilized capacity of its liquefied natural gas (LNG) terminal.
Several reasons bar the private firms from entering into an agreement with PLL for the utilization of the additional capacity of the LNG Terminal, and despite several efforts, during the past two years, either no application or ineligible applications were received, according to official documents available with ProPakistani.
There are two LNG terminals; one is operated by Engro and the second one by Pakistan GasPort Consortium Limited (PGPC). The Engro terminal is being used by Pakistan State Oil (PSO) for its LNG processing, while the second one is utilized by PLL.
In 2021, Pakistan LNG Limited (PLL) utilized only 70 percent of the contracted capacity of 600 million cubic feet per day (mmcfd) of its LNG terminal. The Economic Coordination Committee of the Federal Cabinet had approved the allocation of GOP’s contracted unutilized capacity on three months rolling basis to facilitate private sector import of LNG. PLL undertook four separate processes to offer its unutilized capacity for allocation to private parties during the last two years, the documents reveal.
Citing the reason for the low response from the private firms, the documents noted that the main objective of Third Party Access (TPA) is to increase terminal utilization. However, the current conditions suggest that the private parties will only replace State Owned Enterprises (SOEs) share of RLNG supplies, and there will be no net increase in terminal utilization.
Similarly, the customers being targeted by the applicants are the better-paying customers of Sui companies which may result in further deterioration of the payment recovery situation.
Interested parties are reluctant to participate in the short-term bidding process and require capacity on a long-term basis, the documents read.
No borrowing-lending arrangement is another hurdle to third-party participation. The private party business model is the most likely import of LNG during the low-price months, store it with a terminal, and utilize/sell it during the subsequent months when prices are higher. There is no framework to recover the impact of price differential due to this time-swap arrangement.
TPA Rules for LNG terminals are yet to be developed, and interested parties have so far remained reluctant to participate in the bidding process due to the high LNG prices in the international market, the documents noted.