ISLAMABAD: Amid supply chain challenges that affected the compressed natural gas (CNG) sector in the past, the government is set to allow new licenses to CNG stations purely on the basis of imported re-gasified liquefied natural gas (RLNG) supply.
A meeting of the Economic Coordination Committee (ECC) of the cabinet has been convened on Wednesday to take up a three-point agenda, including permission to grant new RLNG-based CNG licenses to revive the sector, a senior government official confided to Dawn.
The meeting, to be presided over by Adviser to the Prime Minister on Finance and Revenue Dr. Abdul Hafeez Shaikh, will also consider revising subsidized prices of essential commodities under Prime Minister’s Relief Package-2020 owing to increase in market rates.
The ECC will also allocate small quantities of natural gas from Mangrio and Mithri gas fields in Sindh to Sui Southern Gas Company Limited.
At present, the total CNG consumption stands at about 188 million cubic feet per day (mmcfd), down from a peak of about 392 MMCFD between 2009 and 2011 when CNG was a booming business before gas curtailments.
RLNG consumption in the transport sector was about 65 MMCFD in Punjab before Covid-19 which has dropped to 50 MMCFD, while the remaining 140 MMCFD CNG is being consumed in the other provinces, mostly in Sindh. Punjab used to consume a maximum of 240 MMCFD in the transport sector in 2009-11.
The petroleum division has moved a summary for grant of new CNG licenses to absorb the imported RLNG that is becoming surplus after the recent government decision to remove mandatory 66pc purchased for three Punjab-based power plants of about 3,900mw for better privatization proceeds.
The division had been directed by the cabinet committee a few days ago to find alternative options to divert RLNG freed from power plants.
The move is also aimed at optimal utilization of existing two LNG regasification terminals at Port Qasim and create demand for two upcoming terminals over the next 12-18 months.
During this period, the government expects the revival of closed CNG stations and the operationalization of new licenses.
Informed sources, however, said the Oil and Gas Regulatory Authority (Ogra) had opposed the summary primarily because of prior investigations for CNG station approvals and their mushroom growth.
The petroleum division had last year asked Ogra to allow RLNG-based gas connections in line with the ECC decisions. When CNG operators approached Ogra, they were told that licenses of CNG stations which had not been operational for years could not be renewed.
Besides, RLNG was not available in most cities with the result that many CNG stations went out of business.
Under Ogra Ordinance 2002 and the provisions of CNG Production and Marketing Rules 1992, issuance of a CNG license to any prospective investor applicant falls under the exclusive domain of Ogra.
In January 2008, the then caretaker prime minister, Mohammadmian Soomro, while receiving a presentation on a review of the power and gas situation, had directed that “new CNG licenses in the pipeline should be held up and CNG connections should not be given except to those who have already imported CNG machines”.
Later, in April 2011, Prime Minister Yousaf Raza Gillani imposed a moratorium on the provision of new industrial and commercial gas connections across the country with immediate effect for a period of six months.
On the expiry of the said moratorium, Mr. Gillani approved certain proposals with respect to the CNG sector in September 2011 under which Ogra issued marketing licenses to the prospective applicants.
In January 2013 PM Raja Pervaiz Ashraf took up a summary submitted by the erstwhile Ministry of Petroleum and Natural Resources and again put a ban on the issuance of new provisional licenses for setting up of CNG stations.
He ordered that the cases of CNG stations that were 100pc complete in terms of civil work and installation of equipment and had approached Ogra before Feb 29, 2012, for pre-commissioning inspection may be processed for grant of extensions/renewals in provisional licenses where required, and grant marketing licenses accordingly. The PM’s Secretariat later extended the date to June 30, 2012.
The federal cabinet, in its meeting held on April 12, 2017, relaxed the moratorium on new gas connection based on Re-gasified Liquefied Natural Gas (RLNG). Therefore, the gas utility companies are now in a position to provide new gas connections to the CNG sector applicants based on the supply of RLNG.
Further, the private sector is now taking up the import of LNG to service the CNG sector and the burden on the government to ensure gas supply to the sector is also diminishing. Also, CNG pricing was deregulated in 2016 by the government, and prices are now set by CNG stations on the principle of market forces. However, CNG price is still cheaper than that of petrol in terms of heating value as measured in million British Thermal Units (MMBTUs).
In the fresh summary, the petroleum division has proposed that permission to grant new CNG licenses may be accorded and Ogra be asked to incorporate in terms and conditions of RLNG-based CNG licenses that the “license is only for RLNG-based CNG and the licensee cannot claim for its conversion to indigenous gas”.
An official said about Rs25-40 billion worth of investment was expected to be revived over the next couple of years by the CNG stations which had been out of business for almost 12 years.