Electricity production: To avoid inefficiency cost, govt will privatise LNG-based plants

[ziaulislam]

By Zafar Bhutta
Published: March 10, 2015
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The National Electric Power Regulatory Authority (Nepra) is determining an upfront tariff for LNG plants while the responsibility of fuel supply will rest on the government. PHOTO: FILE

ISLAMABAD:
The government has decided to establish a mechanism for giving 3,600-megawatt liquefied natural gas (LNG) based power plants in private hands after their completion, a step prompted by persistent inefficiency and higher line losses of existing state-owned electricity producers.

It was told to the cabinet on February 23 that the decision in this respect was taken in a meeting of the Cabinet Committee on Energy, held on February 12 and chaired by Prime Minister Nawaz Sharif.

Officials familiar with the development told The Express Tribune that it was suggested during the meeting that the government should not set up any new generation company as it was beyond the capacity of the public sector to do business in an efficient manner.

The structure of proposed projects should be prepared in such a way that it allows either privatisation of the projects during their construction or it carries compulsory provisions for their sale after the start of commercial operations, said participants of the meeting.

The ministries of finance, planning and development, water and power and petroleum and natural resources were directed to frame a plan and set the procedure to be followed for their privatisation.

Petroleum and Natural Resources Minister Shahid Khaqan Abbasi briefed the committee on the 3,600MW LNG-based power plants, which were planned to be set up in Punjab.

He said open-cycle projects would be completed in April 2017 whereas combined-cycle projects would be ready in February 2018.

The National Electric Power Regulatory Authority (Nepra) is determining an upfront tariff for the LNG plants while the responsibility of fuel supply will rest on the government.

Availability of working capital for 45 days will be part of the project structure and the government will have to provide assistance for land acquisition.

Abbasi pointed out international and domestic investors had shown their appetite for the projects. However, the financial close could not be achieved in five months as it required a period of one year.

It was suggested that the Ministry of Water and Power should establish project ownership and investment structure in consultation with the Punjab government. Other provinces should also be offered a share in equity and if they indicate the desire of becoming investment partners, the investment structure of the projects may be designed accordingly.

In the cabinet meeting, the prime minister stated that the cost of LNG projects had increased from Rs300 billion to Rs380 billion and provinces would be asked to participate in the schemes.

Finance Minister Ishaq Dar declared that provinces, which paid 20% of project cost through the Annual Development Plan (ADP), would get representation through a nominee of the rank of provincial secretary on the project implementation board.

Water and Power Minister Khawaja Muhammad Asif stressed that if it was found difficult to raise over Rs300 billion for the projects, companies would generate finances from the market outside the Public Sector Development Programme (PSDP).

Supplier credit can be taken in the shape of a loan at concessionary rates from the countries which will provide equipment for the projects.

However, the premier stressed that a decision on financing of the projects through the PSDP had been taken and would not be revoked. However, the option of supplier credit may also be examined.

Published in The Express Tribune, March 10th, 2015



Electricity production: To avoid inefficiency cost, govt will privatise LNG-based plants – The Express Tribune

 

[ziaulislam]

govt is extremely luck that LNG prices have dropped to more than half what they were before (from 16-18$ to 7$).
it is should be able to over come power crisis
but the issue of heavy line losses that are causing huge loss to national check should be now the focus of the government

 

[zaid butt]

govt is extremely luck that LNG prices have dropped to more than half what they were before (from 16-18$ to 7$).
it is should be able to over come power crisis
but the issue of heavy line losses that are causing huge loss to national check should be now the focus of the government

i read some where price is 11

 

[SBD-3]

govt is extremely luck that LNG prices have dropped to more than half what they were before (from 16-18$ to 7$).
it is should be able to over come power crisis
but the issue of heavy line losses that are causing huge loss to national check should be now the focus of the government

LNG prices move in tendum with the Crude prices. Even if the LNG came in expensive, the efficiency gains on running power plants on LNG (4-5%) and lower prices vis-a-vis Crude would always generated relatively cheaper electricity, especially considering the very high cost of generation through caterpillars and private generators, not to mention the pressure on oil bill amid increased demand for private generation.

 

[ziaulislam]

i read some where price is 11

recent news shows that qatar price will 7-8$
international market price right now is 6-8$

 

[Wolfhound]

recent news shows that qatar price will 7-8$
international market price right now is 6-8$

Why are the Qataris selling it to us at a higher prices?

 

[ziaulislam]

Why are the Qataris selling it to us at a higher prices?

its long term deal probably thats the reason.
qataris are selling it more expensive than iran or the TIP
at moment TIP is the cheapest option followed by IP and qatar