Government is in trouble over expensive imported RLNG being diverted to domestic customers.
ISLAMABAD: The government is in a bind when it comes to deciding how much of the pricey imported RLNG it should redirect to domestic users during the winter months, given the nation is already battling with inflation and an impending gas deficit.
The News reported that officials with knowledge of the situation said that at least Rs108 billion in imported LNG was pushed into the local industry over the course of the last four winters, with no money yet being recovered.
“The nation’s gas sector is already drowning in enormous circular debt totaling Rs. 1,500 billion as a result of which it has become unsustainable, much like the power sector, which is saddled with a circular debt of Rs. 2,500 billion. And to meet the domestic sector’s energy needs this winter, the administration is likely to infuse LNG at a rate of 250 to 350 CFD. On the condition of anonymity, a senior official from the Energy Ministry informed The News that this will cost the government an additional Rs110 billion.
A total of Rs174 billion worth of LNG has been poured into the domestic market during the past four winter seasons. With the remaining Rs108 billion, the government paid Rs66 billion to PLL (Pakistan LNG Limited) to settle its debts.
If the government diverts RLNG to the domestic sector during the upcoming winter season, we would have substantially less money to support the subsidies, the official said.
The Petroleum Division is in contact with the Finance Ministry to finalize further subsidies to offset the cost of LNG that has not yet been recouped. Since RLNG is a ring-fenced commodity, the cost of the LNG the residential sector utilizes during the winter cannot be passed through to consumers.
Only the sale of system gas is taxed to the household sector (local natural gas). The cost of imported RLNG cannot be recovered from domestic gas consumers unless the weighted average cost of gas, after blending of natural gas and RLNG, is implemented.
Up to January, the coldest month of the year, the officials in gas companies calculated a gas shortfall of over 1 to 1.2 BCFD (billion cubic feet per day).
Gas will be off-limits to the non-export sector and the CNG business during this time. The amount of gas currently supplied to the export industry would be cut in half, but more significantly, the amount of RLNG currently supplied to the power sector would be decreased by 40–50%.
The government will nevertheless guarantee gas to home users three times for cooking even after diverting 250–350 mmcfd of RLNG to the domestic sector due to the severe piped gas shortage.
In addition to charging a one-time fee of Rs7,000 for each cylinder, both Sui Northern and Sui Southern gas utilities would import LPG for the general public on a daily basis totaling 20,000 metric tonnes at a cost of over Rs2,300 each cylinder.
According to the official, in order to meet the nation’s electrical need of 12,000–13,000 MWs, the government has planned to generate an additional 3,960–4,000 MW of electricity from coal throughout the winter. The demand for electricity will peak at 9,000 MWs somewhere in the winter.
