ISLAMABAD
Finally the Oil and Gas Regulatory Authority (Ogra) has issued the much awaited RLNG prices and announced the provisional rates of the gas at $8.636 per MMBTU.
The authority, however, refused final determination of the RLNG prices till certain condition are met and said that “Final RLNG price cannot be determined unless the LNG procurement made so far bears Federal government approval, mutual agreements in channel are finalised, activities are streamlined and accordingly information complete in all respect are submitted in letter and spirit,” said a notification issued here by OGRA. However, in national/ public interest, the authority has agreed to determine the RLNG prices on provisional basis, the notification said.
According to the notification by the authority the price of the RLNG per MMBTU will be $8.636 which includes LNG DES price $7.72578, PSO import cost $0.00884, Terminal Charges $0.66, PSO margin @1.82pc ($0.14061) of DES price, transmission losses @ 0.5 percent ($0.03863) of DES price and Retainage @ 0.75pc ($0.06296) of total cost.
The Authority disallowed $0.05 per MMBTU administrative margin to the SSGC and SNGPL. “The gas companies have made a general contention on the margin issue and have failed to quantified or justified the same,” Ogra observed.
The authority rejected PSO claim of 4pc margin and instead allowed the company 1.82 percent margin on DES price.
The Ogra also denied SNGPL and SSGCL to charge the consumers the service charges (Service Cost) for the supply of RLNG. SNGPL and SSGCL have claimed $0.52 and $0.13 per MMBTU, service charges, respectively. “The cost of service charge in respect of gas companies is already recovered through revenue requirement process and the existing assets of the companies are also contributed by the RLNG consumers as well since the same are existing consumers on SNGPL network. Accordingly there is rationale that only incremental cost, if any, incurred by the gas companies in connection with RLNG arrangement may be recovered” observed by the OGRA.
The regulatory body also refused to bring the LNG procurement, including cargoes purchased on spot purchases under the umbrella of the provisional price determination and observed that “LNG procurement is yet to be approved by the Federal government as part of SPA and consent of the related parties under mutual agreement has also not been concluded and provided”.
However the authority has decided to incorporate the average terminal cost of $0.66 per MMBTU in the provision prices. Regarding the terminal charges the authority observes that “payment in this regard have to be made in accordance with the mutual agreement,” and added that “the Authority, therefore, includes terminal charges at the levelised tariff of $0.66 per MMBTU in accordance with the decision of the Federal government”.
The authority also excluded the imposition of Infrastructure Cess on LNG, from the provisional price determination, till the final outcome between the federal government and the Excise & Taxation department of Sindh. Infrastructure Cess has been charged on assessed value of LNG by Excise and Taxation department Sindh. However, no such Cess is charged on petroleum products.
“Authority is, therefore of the view that cess should not be imposed on LNG, similar to petroleum products. Accordingly, Federal government and PSO may take up the matter with the concerned quarters,”Ogra stated.
In response to PSO demand of Retainage @ 1.5pc of total LNG delivered quantity the authority includes” Retainage @ 0.75pc on total delivered quantity, subject to review based on the actual volume charge on this account and after obtaining feedback of all stakeholders through public hearing”.
The above determination shall also be applicable on the previous and subsequent months till the issues highlighted above are finally settled. In the subsequent months, DES price, however, shall be taken on provisional/ actual basis as the case may be, given then prevailing circumstances, Ogra notification stated.
Ogra has pointed out some fundamental shortcoming which is creating hurdle in the LNG price determination. The issue of long term, government to government, LNG agreement with Qatar, tripartite agreement among PSO, SNGPL and SSGCL, agreement with the end consumers has yet to be resolved.