Pakistan News

ECC to decide on LNG plants fuel offtake commitments

ECC to decide on LNG plants fuel offtake commitments

ISLAMABAD: The government has called an urgent meeting of the Economic Coordination Committee (ECC) of the Cabinet on a single-point agenda to remove the condition of 66 per cent compulsory utilisation of Liquefied Natural Gas (LNG) by two mega power projects for facilitate their privatisation as required under the International Monetary Fund programme.

The Ministry of Power has proposed to absolve the power sector of the ‘take-or-pay’ responsibility despite the fact the Pakistan State Oil (PSO), the Sui Northern Gas Pipelines Limited (SNGPL) and the Sui Southern Gas Company Limited (SSGCL) have opposed the proposal on the grounds that they were under international obligations to import LNG for power projects.

These entities have put on record that LNG imports were designed for power sector consumption and their international agreements with Qatar and other private companies involved huge penalties.

In a revised summary to the ECC, the Power Division has reported that the Cabinet Committee on Privatisation (CCoP) had approved 100pc divestment of two LNG power plants through a hybrid option for transaction structure. The CCoP also directed the Power Division to ensure that a certain reasonable percentage of off take be contained in the revised power purchase agreements (PPA) and existing risk matrix should be retained.

It said the LNG imports for Government Power Plants were based on special dispensations that the power complex be operated on must-run basis and in case of non-utilisation of Regassified Liquefied Natural Gas (RLNG), Central Power Purchase Agreement (CPPA) was obligated to pay Net Proceeds Differential and non-supply event be made political force majeure event.

Accordingly, the decision was incorporated in the PPA and the power plants were ensured to operate on must-run basis with a guaranteed off-take of 66pc RLNG in the Gas Supply Agreement (GSA), the Power Division said.

It was also decided by the ECC in 2016 that “in case of privatisation of the Haveli Bahadur Shah and Balloki Projects, the Privatisation Commission before discharging the responsibility under applicable laws and incase of privatisation of Bhihki Project, the ECC, shall review and adjust the risk allocation under the implementation agreement meant exclusively for the said Public Sector Projects at the time.”

Published in Dawn, November 8th, 2019

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