Cabinet body decides to free LNG plants from 66% guaranteed offtake

ISLAMABAD:  While criticising PML-N government for signing LNG deal with Qatar at higher rates, Cabinet Committee on Energy decided on Friday to free LNG based power plants from guaranteed 66 per cent LNG offtake.

The committee decided that from January 2022, the 66% of Take-or-Pay under the GSAs will be removed and the gas companies will be free to market and sell the additional gas to other customers.

A meeting of the Cabinet Committee on Energy (CCOE) was held under the Chairmanship of Federal Minister for Planning, Development and Special Initiatives Asad Umar here in Islamabad on Friday.

Cabinet Committee on Energy discussed a proposal of Power Division for waiver of minimum 66% Take-or-Pay commitment in PPAs and GSAs of RLNG plants and Firm Gas Commitment to be finalized based on the Annual Production Plan of Power Sector.

The previous government signed expensive LNG import contracts without any firm demand. This LNG was loaded on the PPAs of Government owned IPPs as Take or Pay commitment at 66% of the plant capacity. These plants have to be run at this capacity even if there are cheaper options available due to such contracts, thus making the electricity unaffordable.

Changing the contacts structure will not only make the electricity cheaper but also significantly reduce the circular debt buildup in coming years.

Cabinet Committee decided that from January 2022, the 66% of Take-or-Pay under the GSAs will be removed and the gas companies will be free to market and sell the additional gas to other customers. Petroleum Division will take all mitigation measures to reduce the cost impact on gas sector and to avoid build up of liabilities. Government will fund any revenue shortfall for the publicly listed companies, if required.

Minister Planning said that this measure would bring overall efficiency in the energy sector. Minister also stated that sustainable and affordable supply of electricity and gas is the corner stone for the overall socio-economic development of the country and a number of steps were being taken in this regard.

The meeting was attended by Minister for Energy Omar Ayub Khan, Federal Minister for Information and Broadcasting Shibli Faraz, Fedreal Minister for Railways Sheikh Rasheed Ahmad, Minister for Maritime Affairs Ali Zaidi, SAPM on Petroleum Nadeem Babar, SAPM on Mineral Resources Shahzad Qasim and senior official of various Divisions.

About The Author