ISLAMABAD - A parliamentary committee was Monday informed that the operator of PGPC LNG Terminal 2 at Port Qasim Authority was paid $45 million fine during past nine months for its idle capacity as the terminal utilisation was only around 54 percent.

The power division is supposed to raise a demand for LNG supply since we don’t get the demand therefore against the full capacity the Pakistan GasPort Consortium Limited (PGPC) LNG Terminal 2 was underutilized and the government had to pay the charges for the idle capacity, said Managing Director Pakistan LNG Limited (PLL) Adnan Gilani while briefing the Senate Standing Committee on Petroleum.

The committee that met with Senator Mohsin Aziz in chair has called for undertaking a probe into the situation of PGPCC LNG Terminal 2 at Port Qasim Authority as to why the terminal is underutilized and why power division doesn’t give adequate demands for gas production to the terminal. The Committee expressed serious concerns as to why such a huge terminal was built and wrong assumptions about demand were made which are not being made now when the terminal is operational.

Adnan Gilani said that the terminal operator was being paid on average $7 million per month for its full capacity of about 600 million cubic feet per day (mmcfd) even though its capacity utilization was around 54 percent.

The standing committee took strong cognizance of the fact that the terminal is working at 54% of its capacity and consequently the government has so far paid 45 million dollars as idle charges for under-utilization in the nine months passed so far. The Committee was of the view that the terms of contract should be well thought out as to not put the government at a disadvantage as the other party has taken a matter of penalties for dispute resolution and huge payments to government are pending. The Committee questioned whether the plant was needed at all and has there been a mismatch in the policies of the government.

Adnan Gilani said that the second terminal was required to be completed by June 30, 2017 which it could not and required extension until September 2017. The terminal could not become operational to the extended deadline and ultimately was available for utilization on January 4, 2018. He said PLL imposed a penalty of $51 million ($30 million on first delay and $21 million for the second delay) but the terminal operator went into dispute over the penalty. He said under the agreement both sides appointed representatives to settle the dispute but continued with routine operations and payments including full capacity payments as per contract.

Chief PLL said that the government representative of the law ministry on dispute resolution resigned in April owing to his engagements with international arbitrations and the law ministry has not yet appointed his replacement.

Senator Mohsin Aziz said an influential and powerful terminal operator was being made full payments for half capacity utilization while amounts recoverable from him had been put into a long dispute resolution route.

Senator Shamim Afridi wondered why the government side was entering into one-sided contracts under which it was bound to pay for capacity not utilized for a project. He said while the country could ill-afford even a dollar loss at this critical stage, large amounts remained un-recovered.

Chairperson of Oil & Gas Regulatory Authority (Ogra) Uzma Adil told the committee that the regulator earlier decided to charge lower capacity payment on terminal in tariff but was compelled to pass on full charges under a decision of the ECC. On her suggestion, the committee agreed to have a cost benefit analysis of the use of furnace oil or LNG in power generation through an independent consultant.

The committee desired hiring an independent consultant to determine if the second LNG terminal was really required and questioned why power sector was still using furnace oil instead of LNG if the later was cheaper.

The Committee also took up details of loans taken by PSO in local and foreign exchange from banks and details of pending inquiries by external agencies against PSO officials. The Committee members were told that PSO has as of today receivables amounting to 240 billion rupees and if the power sector makes its payments on time then PSO would not need to take loans to continue its operations. The Committee recommended timely payments to PSO by the power sector. PSO was also asked to hold an inquiry into fake lubricants being sold in the name of PSO. Expedition of inquiries and bringing them to a logical end was also recommended by the Committee. He said that the PSO earning during the current year is Rs 15 billion.

Regarding the matter of lorries carrying oil, the Committee noted with contribution from OGRA that any and all containers with oil and petroleum products should be given clearance to move only if they are NHA compliant, have explosives clearing certificate and are weight compliant also and if any untoward incident occurs action will be taken against the concerned oil management company.

The meeting was held under the chairmanship of Senator Mohsin Aziz here at the Parliament House on Monday and was attended among others by Senators Sardar Muhammad Azam Khan Musakhel, Lt. Gen (R) Salahuddin Tirmizi, Shamim Afridi, Taj Muhammad Afridi, Dr. Jehanzeb Jamaldini, Bahramand Khan Tangi, Additional Secretary Petroleum, Chairperson Oil and Gas Regulatory Authority (OGRA) Uzma Adil, Managing Director Pakistan LNG Limited and other officials.