In order to slash prices of imported gas by 5% the Petroleum Division has suggested that the government should consolidate all LNG terminal and LNG supply contracts in one state-owned entity in an attempt to eliminate multiple margins and extra port handling charges of state enterprises.
At present, different entities are dealing with LNG imports and terminals. Pakistan State Oil (PSO), Sui Southern Gas Company (SSGC), Pakistan LNG Terminal Limited (PLTL) and Pakistan LNG Limited (PLL) are dealing with LNG terminals and imports, putting millions of rupees worth of burden on the consumers.
“If all contracts are consolidated and placed under one entity, the LNG price may come down by Rs30 per unit,” an official said, adding that PLL and PLTL should be shut down and LNG business should be transferred to PSO and SSGC to reduce cost, which had become uneconomical and no sector was ready to lift the gas.
International LNG prices have gone down to $2 per unit, the lowest in the past 10 years, but Pakistan consumers have been forced to pay over $10 per million British thermal units (mmbtu) due to agreements reached higher prices as well as the inclusion of administration cost and margins of PLL and PLTL.
“Consolidating all contracts under one state entity and eliminating multiple margins and extra port handling charges can lower the cost by about 5%,” the official said.
Other measures that the Petroleum Division proposed included short-term steps like buying cheaper spot cargoes to lower the overall cost.
The Petroleum Division also proposed that existing contracts should be optimised to reduce LNG cost as much as possible whereas the weighted average cost of gas was termed a long-term solution.
