Latest News LNG terminal dry-docking to cost $40 million

 Sources said that the oil and gas companies had informed the government that consumers would be facing a burden of $25 million due to substitute fuel of furnace oil and high speed diesel in power plants to generate electricity.

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Sui Northern Gas Pipelines Limited (SNGPL) has taken-or-pay agreements with power plants. In case, it is unable to provide gas to such power plants, it would have to pay damages that amount to around $7 million.

Similarly, Sui Southern Gas Company Limited (SSGCL) also has taken-or-pay deals with the gas consumers. It will have to pay $5 million to its clients in case it is unable to provide gas to the customers. Pakistan State Oil (PSO) may also pay damages worth $3 million as it also has taken-or-pay agreement with LNG supplier in case it is unable to take supplies due to absence of the Engro LNG terminal.

The summer season has resulted in increased demand for electricity in the country. PSO imports 600 million cubic feet per day (mmcfd) LNG, which is handled on the Engro LNG terminal. Due to dry docking, this gas will be out of the system. SSGC informed the government that only 400 mmcfd LNG will be available after dry docking of the Engro LNG terminal. The second LNG terminal will be dealing with it. Hence, SNGPL was not in favour of dry docking during this month when the demand for gas was high due to rising demand of electricity generation.

Due to the imminent gas crisis, the government had also planned to suspend gas supply to CNG and industries in Punjab and Khyber-Pakhtunkhwa province, a move which the CNG industry had opposed. Sources said that Engro had delayed in serving notice to the government. As per the agreement, it had to serve notice one year before while also submitting an entire plan.

Officials said that months for dry docking were March and October. However, Engro had failed to serve a notice for dry docking. Now, it had come in an emergency that its insurance certificates were going to expire on June 30 and therefore was seeking permission for dry docking.

Sources further said that under the agreement, Engro is bound to make alternate arrangements if its dry docking exceeds the scheduled time.

They further said that delaying tactics on part of Engro were to replace the existing LNG floating terminal with a bigger one. Officials said that SSGC would have to amend the entire LNG service agreement if Engro seeks permission to utilise the additional capacity of terminal. At present, the power sector is generating 25,000MW electricity to meet demand of the country.

After a dry docking, there is an impending crisis of furnace oil and gas. PSO had floated a tender to import furnace oil. But it had to cancel this tender due to higher price of Rs120,000 metric tons against the price of Rs65,000 per ton in local market. PSO is again arranging furnace oil to meet demand in case the government allows Engro terminal for dry docking.