ISLAMABAD: Following in the footsteps of Pakistan State Oil (PSO), Sui Southern and Sui Northern have also given their input asking Petroleum Division to shoot down the Power Division’s proposed summary carrying two options seeking end to utilisation by RLNG power plants minimum 66 percent supply of imported gas.The state-own gas companies in their written response have said that they are of the view that the proposed summary for ECC must be withdrawn by Power Division keeping in view the contractual arrangements and obligations of the parties in LNG and RLNG supply chain that colossal financial losses to the national exchequer could be avoided.It is pertinent to mention that PSO has already opposed the Power Division’s summary saying it is simply not acceptable as it will lead to huge financial losses to the national exchequer and public sector companies involved in LNG supply chain.In a letter written on November 1, 2019 to Petroleum Division on the Power Division’s Option-A, Sui Southern says that LNG Operation and Service Agreement (OSA) between SSGC and EETPL covers the receipt storage and re-gasification of 4.5 MTPA of LNG which translates into annual average of approximately 600 mmcfd on behalf of SNGPL for a firm period of 15 years from March 28, 2015 to March 28, 2030. The LNG volumes supplied at the EETPL terminal are solely arranged by PSO on the demand raised by SNGPL to meet the requirement mainly of power sector meaning by that for RLNG based power plants.The above arrangement of LNG and RLNG supplies are solely covered under an umbrella of tripartite agreement between the parties of SSGC, SNGPL and PSO on back-to-back arrangements between power sector and SNGPL.Sui Southern, according to the letter of which copy is available with The News, further says that the set agreement between SSGC and EETPL can only be voluntarily terminated by SSGC after completion of 9th contract year (save for termination due to default by either party) and such early termination entails massive payments of liquidated damages (LDs) payable to EETPL by SSGC. It also mentions that disputes arising with respect to termination and payments of LDs may also lead to arbitration before London Court of International Arbitration.Such event may result in a major loss to the national exchequer as well as consequential losses along with being a creditability issue for future investments. Sui Southern says that any reduction in re-gasification from EETPL terminal will trigger serious financial implications to all stakeholders and severe loss to the national exchequer due to activation of Take or Pay clause under LSA and idle capacity charges without utilising the full terminal capacity.SSGC also submitted that it has also made huge investments for the construction of dedicated RLNG-1 and RLNG-2 pipelines for transportation of firm 1200 mmcfd to SNGPL. In case of withdrawing the minimum guaranteed off-take of 66 percent, in accordance with proposed option-A, will also result in under utilisation of dedicated RLNG pipeline capacity which will adversely impact SSGC’s financial health as the income from transportation charges will be severely affected, for which a dedicated pipeline was laid on the directives of the Ministry of Energy.Because of the said facts, SSGC says it strongly advocates not to adopt Option-A as it will lead to severe financial consequences for all the parties involved in the LNG and RLNG supply chain ultimately resulting in a heavy financial burden on the national exchequer. This will require an uphill task of amending all the upstream and downstream supply chain contracts, since all the arrangements in the LNG value chain are on firm basis.Mentioning about the Option-B, Sui Southern says PSO’s upstream LNG supply contract with Qatar Gas is for a period of 15 years and will expire in 2031 contrary to the stated year of 2025. It is only the price which can be reviewed after the completion of 10 years, whereas LNG supply quantity will still remain intact.SSGC has limited role in the LNG and RLNG supply chain in form of re-gasification of LNG at EETPL LNG import terminal. Our other issue is the transportation of RLNG which SSGC receives from both LNG terminals, to SNGPL at its off-take point at CTS-Sawan.it is the worthwhile to note that SSGC, PSO and SNGPL entered into back-to-back contractual binding agreements based on firm commitment under legally bindings GSA’ demand from power projects. So, the matter of privatisation of national power parks management company limited shall be progressed only after addressing the issues of the parties involved and securing their interests.Summing up the matter, SSGC says that the proposed options as depicted in the summary, are not workable and will expose public sector enterprises namely PSO, SSGC and SNGPL to huge exposure and financial loss to the national exchequer on account of ‘Take or Pay on LNG supply, Idle capacity charges on terminal, take or pay on terminal (EETPL), bulk of RLNG for which consumer is not available, encashment of guarantees, default on international Gas Sales Agreement’s with Qatar Gas.Sui Southern says it is of the view that the proposed summary may be withdrawal keeping in view the contractual arrangements and obligations of the parties in RLNG supply chain so that the colossal financial losses to national exchequer can be avoided.The Sui Northern also submitted the same arguments with Petroleum Division opposing the power division’s proposed summary about RLNG agreement with RLNG power plants.
from The News International - National https://ift.tt/2oEvPom
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