Karachi Electric (KE) has expressed reluctance to purchase expensive spot-priced re-gasified liquefied natural gas (RLNG) from Pakistan LNG Limited (PLL), saying that any inequality in the RLNG pricing for PLL’s supply to KE as compared to the other power plants in the country should be avoided.
The power utility, which intends to inaugurate first unit of 450 MW its RLNG-fired power of 900 MW on March 21 or 22, 2022, has conveyed its concerns to Petroleum Division.
KE’s Chief Regulatory Affairs & Government Relations Officer, Imran Qureshi, in his letter has stated that the recent trend of PLL buying spot cargoes at extremely high price in the range of $25/ MMBTU to $35/MMBTU, leads to immense hike in PLL’s price of RLNG which is alarming for KE; this is in case the determination of RLNG Sale Price for PLL’s supply to K-Electric is restricted to PLL cargos only, as contrary to the pricing regime for other power plants in the country that are being supplied RLNG at the basket rate notified by OGRA, i.e., at weighted average cost of higher priced PLL cargos and a greater number of lower priced long term PSO cargos.
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According to KE, the need of spot cargos arises either to bridge default of long-term cargos or to meet ad-hoc domestic and/ or system demand of SNGPL that has no correlation with KE. Therefore, the power utility understands that LNG molecules price for KE will either be based on the average of OGRA notified DES prices of both PSO and PLL cargos as being done for other power plants, or will be restricted to PLL cargos under the long-term contract only with the exclusion of spot cargos, if any purchased by PLL.
KE is of the view that the fuel cost is a pass through, so any inequality in the RLNG pricing for PLL’s supply to KE as compared to the other power plants in the country should be avoided as it would lead to injustice with the large population of country’s economic hub situated in gas producing Sindh province.
KE has also claimed that it has already been deprived of locally produced natural gas which is in disregard to Article 158 of the constitution; and in any scenario if KE consumers have to bear the extra cost of immensely high-priced spot LNG cargos that are primarily purchased by GoP to fulfil the needs of SNGPL’s consumers it will not be justified.
“It is extremely crucial that the determination of RLNG Price for PLL’s supply to KE is done in a justified manner, so that KE’s consumers in Karachi and adjoining areas are not treated differently from rest of the country,” he continued.
On February 28, 2022, Directorate General of Gas shared the decision of ECC, duly ratified by the cabinet on determination of RLNG sale price for PLL’s supply to KE, which are as follows;(i) LNG DES Price to be taken as per Contract (s) as per existing guidelines;(ii) PLL’s LNG import related costs and port charges to be taken at actual as per the existing guidelines ;(iii) PLL’ s margin on LNG to be taken as per the existing guidelines;( iv) all the charges under Operation Services Agreement (OSA) including but not limited to capacity charges, utilization charges of Terminal, as well as, retainage to be taken at actual as per the existing guidelines;( v) terminal management fee at actual as per the existing guidelines;(vi) costs associated with interconnection agreement between PLL and SSGCL Io be taken as per the agreement ;(vii) Any other costs under the GSA between KE and PLL to be taken as per the agreement including Operation and Maintenance (O&M) fee for the metering setup; (viii) costs associated with issuance of Performance Security by PLL to KE under Heads of Agreement (HoA) and ;(ix) transmission loss to be determined and charged at actual as per existing guidelines.
