LNG pipelines: bodies set up to negotiate contract prices

bodies set up to negotiate contract prices

ISLAMABAD: The Economic Coordination Committee (ECC) of the federal cabinet has decided to constitute two committees to negotiate contract prices with Russian and Chinese contractors for laying two separate gas pipelines worth around $5 billion for the transport of liquefied natural gas (LNG).

Presided over by Finance Minister Ishaq Dar, the ECC at a meeting on Monday approved restructuring of the Gwadar-Nawabshah LNG Terminal and Pipeline Project (GNP) from build, operate and transfer (BOT) basis to build, operate, own and transfer (BOOT) basis for construction by a Chinese firm, China Petroleum Pipeline Bureau (CPP).

It constituted a price negotiation committee, which will be led by the petroleum secretary and comprise the finance secretary’s nominee, secretaries of law, board of investment and managing directors of the Sui Southern Gas Company (SSGCL) and the Sui Northern Gas Pipelines Limited (SNGPL) to negotiate the project cost and ensure that the revised strategy does not result in increasing the overall cost of the project.

This 700km-pipeline will transport 600mmcfd of re-gasified LNG (RLNG) in the first phase that will be completed by December 2017. It would ultimately be connected with the North-South Gas Pipeline at Nawabshah for onward transportation to the SNGPL’s network in Punjab.

The second price negotiation committee will work on the proposal for the North-South Gas Pipeline from Nawabshah/Karachi to Lahore. The committee would monitor implementation of the project and negotiate the contract price and pipeline pricing with the Russian firm under a government-to-government agreement.

Because of strong opposition from the Oil and Gas Regulatory Authority (Ogra), the ECC did not take a decision on the setting up of three LPG-Airmix facilities in Murree and their financing through natural gas tariff. It, however, noted that in view of the recent approval of the LPG policy for 2016 by the Council of Common Interests (CCI), “there is no need for further approval from the ECC as the LPG Airmix projects were already covered. Now it is for the Ogra to implement the approved policy in letter and spirit”.

The petroleum ministry had proposed that on successful implementation of the three plants in Murree, similar liquefied petroleum gas (LPG) Airmix plants could be opened at 30 locations across the country.

According to petroleum secretary Arshad Mirza, the government was working for the “provision of LPG through Airmix plants to areas where the pipe gas was not economically feasible”. These areas include Murree, Galliat, the northern hilly areas and Azad Kashmir. “Three locations of tehsil Murree have been identified for the installation of LPG Airmix plants as adequate land is available for construction,” he wrote to the ECC.

The SNGPL has already conducted the tendering process for the sites and its board of directors approved the procurement of LPG Airmix plants early last month. Ogra, however, said these plants were “economically unfeasible, constitutionally discriminative and legally inconsistent with the existing framework and the federal government’s earlier decisions”.

“There is no rationale to provide a product at high rates when it is easily available at a far less price in the form of cylinder gas. Resultantly, the proposed projects are uneconomical and shall involve significant subsidies that shall be borne by existing natural gas consumers,” it said.

Source: http://www.dawn.com/news/1251541/lng-pipelines-bodies-set-up-to-negotiate-contract-prices

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