The Economic Coordination Committee (ECC) of the Cabinet approved significant changes to the Liquefied Natural Gas (LNG) Policy on Friday in advance of Prime Minister Shehbaz Sharif’s trip to Doha the following week. These changes remove restrictions on upcoming private sector LNG terminals to provide their partial capacity to the government.
The easing of the import restrictions on all 33 categories of goods, which encompass more than 860 products and tariff lines, was also formally agreed at the ECC meeting under the chairmanship of Finance Minister Miftah Ismail.
Earlier on July 28, the ECC had approved the lifting of the ban on all but three categories—finished units of cars, cell phones, and home appliances. However, PM Sharif did not agree with the move, and hence the cabinet did not endorse the ECC decision.
However, the finance minister declared on Thursday that the restriction would be lifted for all products in response to the International Monetary Fund’s (IMF) demand prior to its board meeting regarding a bailout for Pakistan.
“The ECC agreed that the ban may be lifted on all the items in response to substantial concerns expressed by trading partners about the implementation of the restriction and taking into account how the prohibition has affected supply chains and the domestic retail business. Additionally, the ECC advised the release of those consignments that were delayed after June 30 until July 31, 2022, with a premium, according to an announcement.
In order to facilitate Qatar’s investment in Pakistan’s LNG supply chain, including terminals and LNG supplies, ahead of the Prime Minister’s visit to Doha next week, the ECC approved significant changes to the LNG Policy 2011. Under these changes, a major sticking point regarding the upcoming private sector LNG terminals on the merchant model was removed.
This also gave all LNG terminals, including those that are already in operation, permission to use any extra capacity that is not under contract with the government. As a result, the capacity of the current gas pipeline for future terminals may be constrained.
The ECC made the decision to replace Article 6.2(a) of the LNG Policy, 2011 with amendments that grant Third-Party-Access (TPA) to new LNG terminals and related facilities built by the private sector without any guarantees from the government or off-take commitments, on an optional basis, at a negotiated tariff, and with first use for terminal developers, operators, and their related undertakings.
Following the use-it-or-lose-it approach, this optional TPA will only be available for 20 years from the start of construction, after which every terminal will be required to participate in regulated or negotiated TPA
Furthermore, terminal developers, operators, and associated undertakings will submit relevant information to the Oil & Gas Regulatory Authority (Ogra) for information and market monitoring, including capacity utilisation and terminal tariff (only in the case of TPA).
The TPA for the un-used capacity of LNG terminals contracted by public sector entities will be mandatory and regulated by Ogra.
