Price of imported LNG to be high

ISLAMABAD: All hopes of reducing the cost of doing business with the import of LNG seem to have evaporated, as the government has worked out the price of the imported LNG at 14.833 percent of Brent, which is extremely high.
According to the pricing formula worked out by PSO, Sui Southern and the government RLNG (re-gasified LNG) will be available for consumers in the range of $12.61 to $16.03 per mmbtu after including the tolling fee of LNG terminal, services charges of gas utilities, margin of PSO, PQA and GST.
At this price, the RLNG will provide little solace to the masses as the electricity to be produced by RLNG as fuel will not bring down the power tariffs.
If this formula of 14.833 percent of Brent is applied at $60, $70 and $80 per barrel, then the LNG’s import cost will be $8.94, $10.30 and $11.70 per mmbtu respectively. However, after incorporating the re-gasification charges of 0.66 per mmbtu, retainage of 1 percent, PSO margin 3 percent, margin of Sui Southern which is $ 0.07 per mmbtu, transmission cost of Sui northern that stands at 0.40 per mmbtu, ROA of Sui Northern at $0.20 per mmbtu and transmission losses of 0.50 percent and if GST gets included then the price of RLNG would stay at $12.61, $14.32 and $1603 per mmbtu. Re-gasifiaton charges stand at $1.46 per mmbtu and if port charges are also included then the cost of RLNG will further go up to over $17 per mmbtu. The official documents show that PSO had arranged the existing LNG carrier at $8.74 per mmbtu, which is at higher side if compared with the availability of LNG in the open market through spot purchasing. In the market LNG was available at $7.7 per mmbtu on March 15, which has further decreased to $6.925 per mmbtu on April 15 (today). This means that arranging LNG at $8.74 per mmbtu is really questionable and now the existing FRSU is going to leave Qasim Port today (April 15) for bringing another consignment of LNG as the government has failed to arrange the LNG carrier.

However, under the transaction structure proposed by the government of which a copy is also available with The News, Finance Division will arrange credit or cash facility for PSO equal to two months LNG Value to cover working capital requirements. And PSO will sell LNG to SSGC at inlet flange of terminal. SSGC and SNGPL will have gas swap arrangement.
SNGPL will supply RLNG to IPPs under existing gas sales agreement (GSAs) at value of guarantees or letter of credit to be enhanced by IPPs to Rs2.5 billion each by Saif, Sapphire, Halmore, Orient, Rs7.5 billion by KAPCO (Kot Addu Power Company) and Rs1.5 billion by FKPCL (Fauji Kabirwala power Company Ltd). These are based upon reference price of Brent US$60/BBL and will be adjusted upward for any increase in Brent.
SNGPL will raise monthly invoices on 5th of every month for payment by IPPs in 15 days for onward payment to PSO. Finance Division will ensure timely payments, through TDS arrangement, directly to PSO for onward payments to all concerned parties. Financial charges of SNGPL will be allowed as admissible expense for determination of revenue requirements.