LNG supply chain facing collapse.

Byline: Khalid Hasnain

LAHORE -- Reduced off-take of regasified liquefied natural gas (RLNG) by the power sector has put Pakistan State Oil (PSO) and two public sector gas utilities - Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipelines Ltd (SNGPL) - in trouble as the situation could lead to a penalty of $25 million on per LNG cargo basis.

On the other hand, PSO and SSGC continue to push SNGPL to ensure off-take as per the given demand or be ready to face the adverse consequences (financial loss).

Meanwhile the SNGPL has warned the federal government that any financial loss due to reduced off-take of RLNG shall be billed to the Power Division.

PSO has written to Petroleum Assistant Nadeem Babar that Engro's RLNG terminal has reduced its regasification rate from 630mmcfd to 450mmcfd because of lower off-take by SNGPL. 'This has resulted in accumulation of inventory equivalent to almost one LNG cargo,' the letter, which is dated March 4, reads.

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The state oil company terms the situation at the moment extremely worrisome, saying the LNG vessel, berthed on Feb 29, offloaded the cargo at a very slow discharge rate of 2,800 cubic metres per hour, and incurred estimated demurrage and boil-off expense of around $185,000. Owing to continued lesser off-take by the SNGPL, the cargos arriving on March 10 and 14 are expected to attract not only heavy demurrage charges, but take-or-pay penalties could potentially be activated unless regasification rates are increased to optimum levels of 690mmcfd urgently.

'It is requested to use your good office to impress upon SNGPL for support in order to avoid huge loss to national exchequer. Terminal-1 must be ramped-up to 690mmcfd on urgent basis.'

The SSGC has also written to Babar with the same concerns a few days earlier.

It mentions that at the current regas rates, the Gunvor vessel, which is berthed at EETPL terminal, will incur substantial demurrage charges with the estimated lay-time of 80 hours.

Moreover, if the current situation continues, this could result in back to back LNG cargoes activating take-or-pay conditions of their contracts.

In its defense SNGPL says, in its own letters written on March 4 and 5, it no longer has the customers to sell the...