THE ministry of energy’s abrupt decision to set up before next winter a new LNG terminal — the third in the country — in the public sector is an admission of glaring failure by the PTI government to sway the two private investors to move forward with their terminal projects.
The rationale given by the petroleum division blames the slow progress by the two companies on their projects. This is rather surprising and a manifestation of deep policy confusion. Only a few days back, the government had, by implication, conceded that the development of the private terminals was being delayed due to bureaucratic red tape. What made the government change its mind remains obscure save the fact that the PTI government is getting desperate to fill the energy shortages because another gas crisis next year will erode public goodwill before the 2023 election — and massively.
The private investors, on the other hand, are reluctant to make capital investments without a gas transport agreement, pipeline capacity allocation, land for tie-in facilities and several other regulatory approvals from the Sui gas companies that aren’t coming in spite of cabinet decisions and directives. It appears the gas firms are loath to allow intrusion into their monopolies in the gas market besides being fearful of the notorious anti-corruption watchdog, NAB, whose actions have paralysed decision-making in the corridors of power.
The fear of NAB has also kept the gas utilities from allowing the existing two terminals to increase their LNG import capacity by 600mmfcd — or equal to the total capacity of a new terminal — in a matter of weeks. That could substantially ease the winter gas supply gap with zero cost to the exchequer. Likewise, the renewal of supplies to a private LPG plant could help reduce gas shortages for residential consumers.
It is not wrong to blame the energy ministry for the domestic gas supply shortages. That it wasn’t able to bring in enough LNG to fully utilise the capacity of the existing two terminals speaks volumes about lack of planning. Last week, the energy minister had tweeted that the gas transportation agreement with the sponsors of one of the two proposed private terminals is near conclusion and that three other groups have applied for importing LNG through virtual pipelines.
If that is correct, what is the justification for a public sector RLNG facility since we will not have the capacity to evacuate the imported gas from the new terminals? If the government thinks it can construct the new terminal in the next 10 months to draw political mileage ahead of the next election, it is grossly mistaken. A better option would be to allow the existing terminals to enhance their import capacity and help clear the way for new private LNG infrastructure projects. Bringing additional supplies without enhancing pipeline capacity will be as big a folly as the IPPs.