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The plans for the disaggregation of public gas services and their privatization are back in business, this time as part of the International Monetary Fund (IMF) program. Even before this disaggregation, the main priority of the government is the sale of two government power plants (GPP) based on LNG to meet the objectives of the Fund.<\/p>\n
Read: The main foreign banks bid for the role in the sale of two LNG plants<\/em><\/p>\n The disaggregation of the gas companies was originally proposed by the World Bank to the previous government, but could not be done due to the provincial opposition. The Bank had suggested a Water and Energy Development Authority, such as the disaggregation of gas companies into a transmission company (Transco) and four distribution and sales companies (Disks).<\/p>\n An independent consultant KPMG was hired to evaluate the proposal. The consultant concluded that the disaggregation of Sui companies will not improve the efficiency or profitability of the sector. It was noted that disaggregated Disks could suffer more losses, since coordination and cooperation between transmission and distribution companies under separate ownership would be difficult work.<\/p>\n KPMG concluded that the disaggregation of Sui companies will not improve efficiency or profitability; instead, the Discs could end up having greater losses<\/p>\n<\/blockquote>\n The World Bank and the government have made the financial sustainability group present a pricing framework that is viable for Transco and Discos. The group could not find a viable solution. The Transco option that continually subsidizes Discos in the long term was considered counterproductive. In that scenario, the commitment to disintegrate companies by June 2020 could lead to the bankruptcy of a series of Disks and place the energy sector on a steeper downhill path.<\/p>\n Interestingly, five directorates of the oil division are staying away from this process and, instead, Mari Gas Company employees are leading the exercise and making commitments to the IMF on behalf of the government.<\/p>\n In the midst of this process, the government has accelerated the privatization of two LNG-based power plants. The privatization commission suggests the suspension of the minimum guaranteed extraction of 66{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of LNG to make it attractive to potential investors. That would change the energy buyer's responsibility for capacity payments to Sui Northern Gas Pipelines Limited (SNGPL) because the downstream agreements with the GPPs reflect the corresponding terms and conditions of the upstream agreements consecutively.<\/p>\n That would mean that the SNGPL may not voluntarily accept a minimum extraction reduction of 66 percent unless a proportional review is made in the initial agreements, signed from government to government with foreign entities.<\/p>\n Unfortunately, the LNG supply chain is based on an inherent deficiency. The import of LNG was directed under the premise that it would reduce gas shortages in the electricity sector. But the average consumption of RLNG by the electricity sector has always remained considerably lower than the estimates and objectives. Any fluctuation in the consumption of RLNG by the electricity sector negatively affects the entire RLNG supply chain. Pakistan's energy mix is \u200b\u200bchanging rapidly and is already resulting in underutilization of RLNG-based plants, particularly in periods of less activity.<\/p>\n The worst part is that the federal government has spent about $ 7 billion in the creation of four RLNG projects, $ 1 billion in pipelines in addition to two terminals and the necessary port structure to supply RLNG as primary fuel for the sector electric.<\/p>\n The Energy Division has now moved away from the committed clearance of 66 pieces to the RLNG plants and wants the GPP agreements to be changed without commitment to accept or pay within one year of signing the agreements. The change in mind is due to cheaper coal power plants. Therefore, incorrect estimates and poor planning are presented.<\/p>\n In addition to that, the government will make a large investment in renewable energy to reach more than 25{7be40b84a6a43fc4fae13304fce9a2695859798abfc41afd127b9f8b21c5f9c5} of the power generation by 2025, while the existing investment of $ 5 billion is at risk.<\/p>\n But that is not all. There are key mismatches between ascending and descending supplier agreements. The SNGPL has an RLNG supply agreement on a 100pc take or payment basis against significantly lower firm commitments. The recent pressure of the pipe packages that touch dangerous levels is just an example. On the other hand, the 66pc of takeoff guaranteed by GPP is relaxing to minimize responsibilities and make them attractive.<\/p>\n That leaves the long-term demand for LNG from the electricity sector in limbo. He has already been making short-term demands that are again subject to change every month. Therefore, higher imports have been allowed to flow into the highly subsidized residential sector with a price differential of Rs 1,580 versus Rs 300 per million British thermal units (MMBTU). The estimate to cover only four months of the current year diverting LNG to the residential sector is Rs55bn.<\/p>\n This also results in underutilization of LNG terminals most of the year, except in the peak summer months that also involve capacity payments and the consequent increase in the price of LNG. That means that the cabinet's recent decision to allow five more terminals was unrealistic given the underutilization of existing terminals and insufficient economic conditions to create space for five terminals, even in 10 years. Proportional pipeline capacity would also require substantial investments.<\/p>\n One of the main obstacles in the sale of RLNG to intermediate consumers is its higher sale price because the existing RLNG terminals are underutilized during the period of low demand of the electricity sector. Other sectors only consume small volumes of RLNG due to its high price, which adds to its production costs.<\/p>\n The government's recent decision to provide a gas mixture at a fixed price of $ 6.5 per MMBTU further increases the price difference between the cost of domestic and imported gas. The RLNG can only be absorbed in different sectors up to the optimum level of availability available if the price of the RLNG is part of the weighted average cost of gas as part of the main gas price reforms. <\/p>\n Published in Dawn, The Business and Finance Weekly, October 14, 2019<\/em><\/p>\n<\/p><\/div>\n<\/pre>\n<\/pre>\n Source: https:\/\/www.dawn.com\/news\/1510791\/policy-confusions-in-gas-business<\/p>\n","protected":false},"excerpt":{"rendered":" The plans for the disaggregation of public gas services and their privatization are back in business, this time as part of the International Monetary Fund (IMF) program. Even before this disaggregation, the main priority of the government is the sale of two government power plants (GPP) based on LNG to meet the objectives of the […]<\/p>\n","protected":false},"author":1,"featured_media":8263,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"site-sidebar-layout":"default","site-content-layout":"","ast-site-content-layout":"default","site-content-style":"default","site-sidebar-style":"default","ast-global-header-display":"","ast-banner-title-visibility":"","ast-main-header-display":"","ast-hfb-above-header-display":"","ast-hfb-below-header-display":"","ast-hfb-mobile-header-display":"","site-post-title":"","ast-breadcrumbs-content":"","ast-featured-img":"","footer-sml-layout":"","ast-disable-related-posts":"","theme-transparent-header-meta":"","adv-header-id-meta":"","stick-header-meta":"","header-above-stick-meta":"","header-main-stick-meta":"","header-below-stick-meta":"","astra-migrate-meta-layouts":"default","ast-page-background-enabled":"default","ast-page-background-meta":{"desktop":{"background-color":"var(--ast-global-color-5)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"ast-content-background-meta":{"desktop":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"tablet":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""},"mobile":{"background-color":"var(--ast-global-color-4)","background-image":"","background-repeat":"repeat","background-position":"center center","background-size":"auto","background-attachment":"scroll","background-type":"","background-media":"","overlay-type":"","overlay-color":"","overlay-opacity":"","overlay-gradient":""}},"footnotes":""},"categories":[11077],"tags":[],"class_list":["post-8262","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-newspaper"],"_links":{"self":[{"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/posts\/8262","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/comments?post=8262"}],"version-history":[{"count":0,"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/posts\/8262\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/umang.pk\/ur\/wp-json\/"}],"wp:attachment":[{"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/media?parent=8262"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/categories?post=8262"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/umang.pk\/ur\/wp-json\/wp\/v2\/tags?post=8262"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}\n