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  • Sep 7th, 2015
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The government has reportedly decided to use Government Holding Private Limited (GHPL) to deal with energy crisis, by establishing five subsidiaries in power sector - two for LNG, and one each for gas transmission, alternative energy and oil infrastructure, highly reliable sources in Petroleum Ministry told Business Recorder.

The sources revealed that the Petroleum Minister presided over a meeting on August 28, 2015 wherein it was decided that in the face of multiple challenges and the energy crisis facing the country, Ministry of Petroleum & Natural Resources is obligated to move forward and come up with innovative solutions to overcome this crisis since business as usual will not yield the desired results in a dynamic environment.

Given the major share in national energy mix, natural gas is expected to remain the mainstay of our energy economy in the foreseeable future to meet the energy requirements of the country. Despite currently producing 4 billion cubic feet (BCFD) of natural gas, the country is still deficient in natural gas and the unconstrained demand is above 6 BCFD which will increase in the coming years due to fast depletion of existing natural gas reservoirs.

The country, therefore, will have to meet the ever growing demand/supply gap of natural gas not only through accelerating indigenous exploration & production but also by importing natural gas through transnational gas pipelines and in the form of imported Liquefied Natural Gas (LNG).

In this backdrop, the role of GHPL, a 100 percent state owned company under the Ministry of Petroleum & Natural Resources, came under discussion. GHPL was created in the year 2000 with the purpose of separating the regulatory and commercial functions and to efficiently manage the government's interest in petroleum exploration and production joint ventures previously managed by Directorate General of Petroleum Concession.

The company started its operations from 1st July, 2001. However, after the promulgation of 18th Constitutional amendment, role of GHPL began to gradually fade since now it can hold only 2.5 percent of shareholding in future exploration and production activities and not further increase its shares in the subsequent hydrocarbon discoveries in the country. It is the considered opinion of the Ministry that GHPL as a 100 percent owned company of the government must be mandated to play a critical role in the emerging energy scenario of the country.

Official documents reveal that during the discourse Minister appreciated the idea of creation of GHPL. He, however, observed that the company did not do much for expansion of its activities. Moreover, after the 18th Constitutional Amendment, its role would gradually diminish. Therefore, this company is fast losing its significance as one of major E&P companies due to its least participatory role in the future E&P activities. This situation demands the company to play a positive renewed and dynamic role in the present and emerging energy scenario of the country besides its core E&P functions.

Minister gave the example of China Poly Group Corp which was formed in 1992 and now it has 166 central enterprises under the supervision and management of the State-owned Assets Supervision and Administration Commission (SASAC). Minister stressed the need to expand the operations of GHPL not limited only to E&P activities but also in other areas of energy.

Minister said that Prime Minister/Cabinet Committee on Energy (CCoE) has mandated the Ministry of Petroleum & NR to set up Fast Track 1000 MW LNG-based power plants in the existing five dysfunctional power plants by summer next year - single cycle in the first phase and combined cycle afterwards. These will be more energy efficient than the existing inefficient ones. Minister stated that the payback period with generation of additional 1000 MW electricity through RLNG based power plants will be less than 2 years for the country. GHPL, however, will get the return on its investment as per the tariff determined by NEPRA. Nonetheless, keeping in view the overall national objective and to supplement the efforts of the government, the Ministry of Petroleum being responsible for fuel supply has been asked to come forward for power generation in the country to overcome energy crisis. Therefore, a GHPL Power Generation Company may be established to set up power plants in the country at locations of Sukkur, Multan, Shahdra, Faisalabad and one green field site at Mardan at the sites of non-functional power plants of the GENCO Holding Company of Ministry of Water & Power. Since someone apart from Ministry of Water & Power has to take the initiative therefore GHPL seems to be the best choice to set up this power generation subsidiary company to honour the mandate given to the MP&NR by the CUoE/Prime Minister.

Minister stated that due to ever increasing energy requirements of the country, the size of LNG imports is going to be huge in the coming days. Foreseeing this huge volume well thought out planning coupled with substantial investment plan and dynamic organisation with efficient infrastructure will be the need of the hour. Minister said that in the coming years, LNG procurement volumes will be much larger than oil as it will replace imported furnace oil in power generation. As the oil procurement is quite different than that of LNG, therefore, a specialised company well versed in planning and procurement of LNG according to international standards is required to be established. With enhanced import of LNG in the country, more LNG Terminals and allied infrastructure including transmission gas pipelines will have to be built. This necessitates a separate specialised LNG Terminals Company to handle and re-gasify imported LNG. This company will monitor the demand/supply as well as market dynamics and will enter into LNG Sales/Purchase Agreements (long term as well as short term contracts) and will procure LNG at the best market prices. The company will be responsible for entering into contracts, owning, operating and managing terminals.

Minister emphasised the importance of unbundling of gas assets to do away with the redundancies for an efficient and effective gas transmission and distribution system and added that in view of the geo-strategic location of Pakistan and the fact that different transnational gas pipelines like Iran - Pakistan and TAPI Gas Pipelines will traverse through Pakistan it has therefore the potential to become a transit hub in the region. Furthermore with the construction of 1,100 kms North - South Gas Pipeline and completion of LNG import projects, a new Gas Transmission Company is essential for the country. This Gas Transmission Company will manage not only the newly built but also the existing gas transmission assets. In this backdrop, SSGC and SNGPL were asked to move forward in unbundling of gas assets; however, both the Utilities have not come up with any plan in this regard.

Minister also highlighted the potential in alternate energy and stated that while the who1e world is moving to alternate energy, Pakistan remained dependent on private sector on the development of this resource. Approach of private sector is uneconomical resulting in poorly built inefficient plants with high tariff. At present, no government owned company is doing alternate energy projects. In order to tap the alternate energy potential of Pakistan like solar, wind and other alternate energy resources, an Alternate Energy Company also needs to be established under GHPL. This company will be responsible for implementation and execution of alternate energy projects particularly with off-grid solutions.

Coming to oil imports, Pakistan is the second largest importer of furnace oil. Oil import requires huge infrastructure of pipeline and storages for which there is no planning at present. Minister underscored the need to establish Oil Infrastructure and Storage Company to cater for the future oil infrastructure needs.

Minister said that since GHPL is the 100 percent owned company under MP&NR having good revenue base, therefore, a number of companies can be created under it which can cater to great extent the rising demand of energy in the country. As per the existing Memorandum of Association of GHPL it alone cannot perform these function, therefore, subsidiaries will have to be established under GHPL. Since a number of different projects are to be implemented, therefore, a new company for each task has to be set up separately.

Minister proposed that GHPL should be authorised and directed to invest in the above mentioned ventures by initially establishing following subsidiaries/sub-subsidiaries with investment plan and efficient structure to be determined with the approval of GHPL Board:

1. GHPL Power Generation Company Limited (5 subsidiaries)

i) GHPL Power Generation, Sukkur, Limited

ii) GHPL Power Generation, Faisalabad, Limited

iii) GHPL Power Generation, Multan, Limited

iv) GHPL Power Generation, Shahdra, Limited

v) GHPL Power Generation, Peshawar, Limited

2. Pakistan LNG Limited

3. Pakistan LNG Terminal Limited

4. Pakistan Gas Transmission Limited

5. Pakistan Alternate Energy Limited

6. Pakistan Oil Infrastructure and Storage Company Limited

GHPL already has a subsidiary namely Inter State Gas System (Pvt) Limited, holding 99.57 percent shares. ISGSL under the instructions from Government of Pakistan has been working on Turkmenistan Afghanistan Pakistan and India (TAPI) Gas Pipeline Project and Iran Pakistan (IP) Gas Pipeline Project/Gwadar Nawabshah LNG Terminal and Gas Pipeline Project under Government to Government (G to G) arrangements between Pakistan and China. Moreover, ISGSL is also implementing 1100 Kms, North-South Gas Pipeline Project under G to G arrangements.

The financing arrangements for projects shall be from the following sources: (i) GHPL's own resources; (ii) borrowings from financial institutions/banks; (iii)

Suppliers' credits; and (iv) GoP funding wherever required with the approval of Finance Division.

Copyright Business Recorder, 2015


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