Private Sector Company Permitted To Import LNG

ISLAMABAD: A private sector firm, Universal Gas Distribution Company (UGDC), was permitted on Wednesday to buy or import liquefied natural gas (LNG) from suppliers and sell it to CNG (compressed natural gas) stations across the country for vehicular utilization.
A formal licence has been issued by the Gas and Oil Regulatory Authority (Ogra) to UGDC for sale of natural gas for an initial phase of 10 years.

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The company is a joint venture created by CNG administrators led by All Pakistan CNG Association (APCNGA) Chairman Ghiyas Abdullah Paracha.

This is the first occasion that a private sector firm had been permitted to sell imported LNG to buyers — a business currently in the monopoly of the 2 gas utilities, namely the Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL).

This came following a letter of solace issued by the federal government to the UDGC for import and sale of 75 million cubic feet per day (mmcfd) of LNG through extra processing capacity at the Engro LNG Terminal in December.

Mr Paracha, who is likewise the company’s CEO, said the licence was issued after his firm efforts of almost nineteen months and completion of the whole legal procedure. “Ogra likewise vetted legal system, conducted public hearings and conducted third-party audit before approval. UGDC can now import LNG or buy it from any private or government entity to sell it to buyers,” he said.

Ogra said it issued the licence for sale of natural gas to UGDC under sections twenty-two and twenty-three of the Ogra Ordinance and Natural Gas Regulatory Authority Rules “to undertake regulated activity of sale of natural gas to buyers”.

Under the licence, the company will transport natural gas from transmission and distribution network of integrated gas companies (Sui Northern Gas Pipelines Limited (SNGPL) and Sui Southern Gas Company Limited (SSGCL)) under the terms and conditions of Gas Transportation Agreement (GTA) under 3rd-party access regime, law and rules.

“UGDC will be exclusively responsible to buy/arrange LNG and re-gasify at EETPL’s terminal or any other terminal with earlier permission of Ogra through finance arranged in accordance with Securities and Exchange Commission of Pakistan [SECP] applicable regulations, being a commercial transaction,” Ogra said, including: “SSGCL and SNGPL will enter into GTA strictly in accordance with the applicable government policies, applicable law and allocations after fullfilling technical and financial modalities.”

The UGDC will be required to get services of gas utilities for billing and metering under the mutually consented services agreement until and unless it sets up its own billing and metering system to the satisfaction of the regulator.

UGDC Chairman Iftikhar Ahmad and CEO Paracha respected the decision, saying it would promote investment and enhance investor confidence to help end energy crisis and revive an otherwise struggling CNG sector. “This is the first ever try by a sinking industry to bail out itself. It will become a case study in the business schools around the world,” said Mr Ahmad, a retired brigadier.

Thousands of closed CNG stations in Punjab would be revived through continuous supply of gas through the network of Sui companies according to existing rules and regulation which will be 30% cheaper than petrol, Mr Paracha said.

He said the sale of domestic gas to CNG stations would continue to be under costs approved by Ogra while LNG-based sale of gas would be fully independent and based on commercial terms and yet 30% cheaper than petrol.

He said the move would reduce oil import bill, cut urban pollution, provide jobs to numerous and bail out the sinking CNG industry in which individuals had invested over Rs350 billion.

Responding to a question, Mr Paracha said the UGDC was now authorized to arrange and sell LNG under 2011 LNG policy simply on a commercial basis. He said the UGDC was in the process of securing LNG from PSO that would be transported utilizing the existing system of gas utilities at a charge. Government taxes would then be added to fix a price for customers.

Now, the CNG stations situated in residential areas would be enabled to move out their outlets and would likewise be permitted to utilize electricity generators in case of power failure which is currently prohibited because of their location.

He said the government had permitted them 75 mmcfd of LNG in the first stage, even though demand was more than 300 mmcfd. He said the priority would be secure 75 mmcfd share out of LNG being imported by the government through Qatar gas. However, in case the government was able to sell all these quantities to the power sector, the UGDC was likewise in contact with different suppliers.

He said the gas utilities had shared a GTA draft with the UGDC for transportation charges different modalities, but this couldn't be signed in the absence of the licence that had now been issued by Ogra.

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