The Power Division has sought comments from different stakeholders regarding import of LNG from various suppliers under Government to Government (G2G) arrangements, pursuant to the direction of Prime Minister Imran Khan to explore possibility of contracting additional 200 MMCFD of LNG at reduced rates to meet demand supply gap.
Accordingly, CPPA-G, in its comments has apprised that operational and financial aspects should be considered prior to moving on the proposal for import of additional LNG volumes of 200-400 MMCFD on term contract under G2G instead of spot purchases.
The CPPA-G argues that in case of import of LNG for power sector, storage facility for LNG should be made functional prior to entering into another term contract, to provide operational flexibility to deal with demand variations (in different seasons) and supply variations (due to seasonal availability of hydro sources, intermittent nature of renewable energy sources and handling of force majeure outages).
"Supply chain risk should not be parked with the power sector, therefore, no Net Price Differential (NPD) should be charged to the power sector," the sources quoted Zubair Mahmood, Team Lead, Policy Governance & Corporate Planning (PG&CP) saying in his letter to the Power Division.
CPPA-G further maintains that in case NPD is to be charged to power sector, it should be ascertained that the savings from term contract verses spot purchase should be higher than the NPD to be charged to power sector due to demand-supply variability risk (in case it is not hedged through storage facility).
CPPA-G further argued that since the current government''s vision is to increase the share of Renewable Energy (RE) in the generation mix, the term contract for LNG for ten years will have adverse implications on the generation mix as well as on the consumer end basket price.
However, in case of import of LNG to meet the energy requirement (other than power sector), storage facility for LNG should be established prior to entering into another term contract to provide operational flexibility to deal with demand supply variability risk.
Basket poor price and local gas and LNG should be determined, keeping in view the existing and future term contracts for LNG, accordingly, the price risk and supply chain risk for LNG term contracts should be shared by all the sectors for sustainability of entire supply chain, CPPA-G concluded.
