ISLAMABAD - Ministry of Petroleum is all set to drop a new bomb of price hike and inflation by replacing the existing cheap CNG with expensive LNG, The Nation has learnt.
In this regard, the ministry has succeeded in convincing CNG station owners for the swap by allegedly threatening them of closing gas supply to the CNG sector permanently.
To achieve this goal, the ministry has been implementing new gas curtailment plans every week, from the last couple of months, in which duration of gas supply was gradually made very thin. The duration was squeezed to 16 hours per week.
Presently, the CNG stations in Punjab are supplied gas for two days a week.
Additionally, the ministry also has been pressurizing the CNG owners by decreasing gas supply to their stations, through SNGPL, due to which sales of CNG stations has come down drastically.
After all these pressures and promises of seven days a week 24 hours a day LNG supply, CNG owners bowed to the plans of Ministry of Petroleum.
According to the details of the conversion plan, 200 mmcfd LNG would be provided to CNG stations of Punjab in first phase by 31-03-2015. Another 150 mmcfd liquid gas would be added to CNG stations by 31-12-2015 and while another 275 mmcfd LNG would be provided to CNG stations by 31-05-2016.
"Till 2016 a total of 625 mmcfd LNG would be provided to CNG stations so that they could be remain operational day and night continuously, throughout the year", said a source. It was learnt that after the start of LNG supply to stations by end of March next year, the natural gas supply to stations would be halted completely.
The demand of CNG is 250 mmcfd in Punjab, whereas KP has 70 mmcfd, and Sindh has 90 mmcfd for continuous operations. During the negotiations between CNG owners and the ministry, pricing remained a tough issue.
The CNG owners through association had rejected the LNG plan on pricing issue arguing nobody would buy expensive LNG from them. The accountants of ministry of petroleum intelligently handled this issue by suggesting that LNG could be sold in litres instead of prevailing kilograms. In this way, the consumers will not feel additional cost and psychologically they will be willing to pay the price difference between CNG and LNG.
After sorting out the pricing formula, the CNG association accepted to shift their existing machinery to LNG system, in such a way that consumers could get LNG in the same cylinders and kits they are using for CNG. According to sources, the ministry convinced CNG owners after realizing that LNG cannot be supplied as a substitute to natural gas to general public due to its high cost. It was learnt that Ministry for Industry was reluctant to get expensive LNG. The ministry bosses finally succeeded in convincing CNG owners through the association to buy LNG.
This proposal is likely to be tabled in next ECC meeting for approval for the pipeline capacity to transport re-gasified LNG to the CNG sector.
According to estimates from this natural gas, after three years, up to 1500 MW electricity could be produced.
According to the pricing formula agreed between the CNG association and Ministry of Petroleum, LNG would be maintained at 25-30 percent parity with petrol.
This arrangement seems attractive apparently, but experts believe that by selling LNG in litres consumers would have to pay an additional cost as compared to prevailing CNG cost, and additionally, their mileage would also drop.
"If temperature and pressure is constant, one kilograme CNG would be equal to approximately 1.5 liter of LNG", Amjad Hussain, a CNG technician, told The Nation.
"It means if one car with old carburetor technology covers 120 kilometres in one cylinder (say 7.5 kg, or roughly Rs.600 CNG), the same cylinder would be filled in 11 litres of LNG and would cover less than 120 kilometres," he explained.
According to the agreed pricing, LNG per liter price would be approximately Rs.70, which means consumer would have to pay Rs.170 additional per cylinder as compared to CNG. It is worth mentioning here that the ministry has promised that if they convert to LNG, the government would not charge them 17 percent general sales tax and GIDC. The government is yet to finalise bidder for LNG supply to the country and prices have yet to be announced but the ministry did all this negotiations with CNG owners on assumed prices.
Experts believe that as a general rule, LNG is expensive than CNG. If this expensive LNG is used in vehicles, it would increase transport fares, resulting in immediate increase of food items, and other goods prices.
Pakistan's CNG industry is worth Rs.400 billion and more than 4 million vehicles use CNG as their main fuel.