OGRA finalises capacity allocations for LNG imports of 1.4 billion cfd

The Oil and Gas Regulatory Authority (OGRA) on Thursday made capacity allocations to three companies to import 1.4 billion cubic feet per day (bcfd) of Liquefied Natural Gas (LNG) which will begin from June next year.
Addressing a news conference Acting Chairman OGRA Sabir Hussain said three companies including Global Energy, Engro and Pakistan Gas port will be providing performance bank guarantees of $10 million each to meet their LNG delivery deadlines. He said the Global Energy of Turkey is expected to start importing LNG by June 2012, followed by Engro by December next year and Pakistan Gasport by early 2013.
With the natural gas shortages estimated to rise to over 2 bcfd this winter season, the government is hard pressed to meet the rising demand in the power and gas sectors. The only option left is to expedite LNG imports. The Global Energy and Engro will be importing 500 mmcfd while Pakistan Gasport will be importing 400 mmcfd. The imported LNG will be mainly utilised for power generation. About 500 mmcfd of LNG can produce about 2,500 MW of electricity. Pakistan is faced with a power shortfall of over 5,000 MW which is crippling economy.
Hussain said the capacity allocations were made by the OGRA in consultation with the ministry of petroleum and other stakeholders. The companies are also required to submit their timelines for the import of LNG so that the two state owned gas utilities SNGPL and SSGCL make arrangements to construct infrastructure to receive imported LNG. An estimated investment of $1.2 billion is required for laying a dedicated pipeline to transmit the RLNG from the port to power plants in Punjab.
OGRA had issued construction licenses to the three companies to set up LNG terminals on a fast-track basis to offset severe gas shortfall. The Port Qasim Authority is already working with investors to develop a jetty and terminal facilities for handling LNG. Under the third party access rules finalised by OGRA, LNG importers would use pipelines of gas utilities for transportation of the fuel across the country.
Under the rules the companies will be paying fee at Rs40,000 per 10 mmcfd and firm commitment from RLNG buyers to be provided within 90 days of capacity allocation and duly authenticated through required procedures. Ramp-up period to achieve full pipeline allocated capacity utilisation should be provided within 90 days duly agreed between the project proponent and gas utilities. Entry and exit points should be indicated to gas utility companies within 90 days.
Performance bank guarantee of $10 million, en-cashable in Pakistan, to be furnished within 90 days of capacity allocation. The utility companies, SNGPL and SSGCL, will start investing in capacity enhancement after receipt of performance bank guarantee from a bank acceptable to OGRA and en-cashable in Pakistan. The companies are required to submit engineering contract and design along with detailed schedule and time line within 15 days of capacity allocation. In addition the investors are directed to submit provisional financial plan regarding the funding of the project to OGRA within 15 days of capacity allocation.
Financial closure must be achieved within six months of the capacity allocation with due intimation to OGRA. The Implementation Agreement with Port Qasim Authority should be submitted to the authority by project proponent within 30 days of capacity allocation. Failure to achieve the above milestones may tantamount to cancellation of allocated capacity and en-cashment of bank guarantee. The capacity allocated to the companies cannot be transferred to another person by way of sale, assignment, transfer or surrender to any other person without prior approval of the authority.