he government has charged almost $2,960,000 (Rs473 million) illegally from LNG consumers in the last seven months in the name of margin of PLTL (Pakistan LNG Terminal Limited) despite its merger into Pakistan LNG Limited (PLL) on Jan 1, 2021.
The PLTL Board of Directors has been abolished and there is no MD (Managing director) and CFO (Chief Financial Officer) of the PLTL in place since its merger. Interestingly, the government is found to have charged LNG consumers in the last seven months in the name of the PLTL margin being part of LSA (LNG Services Agreement) Management Fee that stands at $0.025 per MMBTU.
The word ‘PLTL margin’ has now been omitted from the LSA contract after OGRA notified new LNG prices for August and subsequently withdrew it after PSO’s refusal to buy LNG at the rate of $20 per MMBTU (27.87% of the Brent). According to the data available with The News, the PLL imported five cargoes till Jan 21, 2021, after the merger of two entities and the government charged $0,025 per MMBTU as the PLTL margin amounting to $400,000 (Rs6,400,000) and till Feb 21, it imported three cargoes and minted $240,000 (Rs3,840,000) from the LNG consumers. Likewise, till March 21, it imported five LNG cargoes and earned $400,000 (Rs6,400,000) from the consumers in the name of the PLTL margin.
Till April 21, 2021, the PLL imported six LNG cargoes and made $480,000 (Rs76,800,000) and it continued to import six cargoes each in May, June and July and charged $480,000 (Rs76,800,000) in each month.
In the buildup of LNG prices for every month in the last seven months worked out by OGRA, the PLTL margin of 0.025 is mentioned and visible. The PLTL margin of 0.025 is charged as part of the LNG services agreement management fee apart from other margins.
However, officials at the Ministry of Energy said the PLTL function has been shifted to the PLL. So the margin is justified but it should be reduced and also be renamed also.
When contacted, the Petroleum secretary said that one meeting of the PLTL board used to cost Rs375,000. As far as savings on account of rationalisation of manpower is concerned, even before the merger, the PLTL and PLL managed their operations by minimising cost through co-opting employees from each other. Both the entities had a common CEO, CFO, HR, legal, IT and technical personnel. Post-merger about Rs70 million will be saved annually owing to elimination of duplicate positions of CEO, CFO, CIA, Company Secretary, Manager HR, IT, Technical and Legal.
Naming the LNG Operation and Services Agreement margin as ‘PLTL Margin’ is also not correct. The RLNG Sales Price included $0.025 per MMBTU for LSA Management fee for SSGC as non-operating income. The LSA Management Fee was approved as an RLNG pricing component before PLTL started its operations. The PLTL achieved Commercial Operation on Jan 4, 2018 and the same LSA Management Fee was adopted for the PLTL.
The ECC through its decision dated June 6, 2015, against Case No ECC-87/11/2015 had constituted a committee consisting of Finance, Power, and Petroleum and Law secretaries on the RLNG pricing mechanism. The recommendation of the committee was adopted by the ECC through its decision dated June 14, 2016, vide Case No. ECC-72/12/2016. The Management Fee was to cover the cost of SBLC to be provided in accordance with the agreement with Terminal Operator.
When contacted, the Securities and Exchange Commission of Pakistan confirmed that its committee has given approval for merger of Pakistan LNG Terminal Ltd into Pakistan LNG Limited and the company has been informed to file revised memorandum of association and article of association of company and updated annual forms with altered details. Once a company has submitted revised forms, SECP’s Company Registration Office, where both companies are registered, will accept the filling and pass an order of merger.
An OGRA spokesman said the margin of $0.025 as LSA Management fee remains as part of price as per the policy guidelines of GOP and there is no revision of them so far. The regulator also said that the LSA management fee (Terminal management fee) is given to entities managing terminal operations, with the fee covering certain costs that are not covered in the RLNG tariff and the margin of LNG importers.
The function of terminal operator is now being handled by the PLL directly with the costs associated with the Terminal Management Fee continuing to be borne by the PLL.
The PLL is the company which imports LNG and gets it re-gasified through PGPL LNG Terminal and after the merger it is now performing the PLTL functions.
Sources said that the PLL has no capacity to gauge the future LNG prices in the international market. The PLL is the company that had earlier terminated the LNG Import contract of eight cargoes for September-October at $13.787-$16.0 per MMBTU with the hope it will get less price when it goes for re-tendering, but it got the highest price of four cargoes for September at over $15per MMBTU after scrapping the third contract. Surprisingly, the PLL earlier got the bids in range of $10.2937 per MMBTU to $11.7747 per MMBTU for July cargoes, and $10.51 to $10.8312 for cargoes to be delivered in August. This all exposes the PLL capacity with regard to terminating the contracts for LNG cargoes at lower prices and honoring the contract with higher prices.
