Ogra refuses to determine RLNG sale price

ISLAMABAD: Oil and Gas Regulatory Authority (Ogra) has refused to determine the RLNG sales price arguing that the state-owned Pakistan State Oil has procured and sold the product worth Rs34 billion without any price notification.
It further said PSO has failed to provide the required information including the invoices of the imported LNG vetted by the ministry of petroleum and natural resources, a senior official of the ministry privy to the development told The News Wednesday.
The LNG is being imported since March 30, 2015 to cope with the burgeoning energy crisis but the LNG is being sold to the fertilizer, power and CNG sectors without any price notification. If the LNG is sold without rules and regulations, then huge financial burden will be borne by masses as Sui Southern, Sui Northern and PSO want to continue to take to advantage of margins out of the product. Ogra, according to the official, has expressed its reservation over 4 percent margin set by PSO on its own.
Ogra has not been provided by PSO the invoices of the LNG import vetted by the ministry even after many meetings held in Islamabad. The regulator, the official said, has been informed that many LNG ships were procured under verbal orders from Islamabad through PSO and the state-owned oil marketing company failed to provide the invoices vetted by the ministry, which is why Ogra has decided not to determine the LNG sale price. The regulator has also questioned the authority under which PSO imported the LNG and sold it without price notification. The Sui Northern is currently selling LNG at $12.50 per MMBTU without any price notification.
“Ogra received the letter from the government on July 27 over the policy guidelines on regulating the LNG prices in the country and the regulator immediately sought from the Sui Northern, Sui Southern and PSO the invoices along with other required information, but all they did not respond.
When asked if Pakistan State Oil has licence to import

LNG, the official replied in the negative. PSO, however, argues that it does not need an import licence as it is not involved in the sale of the product.
To a question he said that Ogra needs the invoices of as spot purchasing is being done and there is no long-term contract. “Ogra does not need the invoices of petroleum products vetted by the government as it knows that there is a long term agreement of PSO with Kuwait Petroleum but in case of LNG the situation is entirely different”, the official said.
Pakistan State Oil is facing another kind of circular debt on LNG as Sui Southern has failed to pay Rs29 billion because there is no notified price of RLNG in the country.
Now, the government wants Ogra to determine the sale price of RLNG so that National Electric Power Authority (NEPRA) could determine the tariff of electricity units, which are generated by RLNG as fuel. Just because of non-availability of notified gas sale price, PSO is unable to recover Rs27 billion for the RLNG that has been consumed mainly by the power sector.
Ogra received the letter on July 27 and the regulator immediately sought from the Sui Northern, Sui Southern and PSO the invoices along with other required information, but these entities did not respond. Now we have summoned their representatives keeping in view the urgency of the issue.
The official said that Ogra was to determine the LNG prices at delivery ex-ship (DES) stage. The regulator will also take care of exchange rate and cost and freight of the LNG product while determining the gas sale price.
When asked if the government has set the margin of Pakistan State Oil up to 4 percent, the Ogra official said the policy guidelines letter has indeed mentioned the PSO’s margin on LNG up to 4 percent, but Ogra may determine it at 2.5 percent, or three percent depending upon the rationale of PSO for the margin. Ogra will also determine the administrative charges which have been fixed by the government at 0.05 dollar per MMBTU. The regulator will assess its reasonability keeping in view some benchmarks. In addition, the regulator will also assess the services charges knowing the fact that there are no benchmarks to this effect.
“Once we know the purchase price, then sale price of LNG will be determined,” the official argued adding that if PSO does not provide the invoices Ogra cannot determine the sale price.