The petroleum ministry has held the Oil and Gas Regulatory Authority (Ogra) responsible for the recent fuel crisis in the country.

In a report submitted to the petroleum minister, the office of director-general for oil said that Ogra failed to perform its duty as a regulator as it did not take timely action to head off a crisis. Ogra’s ineffectiveness resulted in black marketing of petrol and diesel in many parts of the country.

Sources in the ministry said Ogra was supposed to take steps to ensure availability of petrol across the country not only by taking measures against hoarders and black marketers but also through timely imports to meet the shortage created by the shutdown of Parco due to floods.

“The Ogra teams did nothing other than to send show-cause notices to oil marketing companies (OMCs) during the crisis and to wait for the replies to such notices,” an official said.

Petroleum Minister Syed Naveed Qamar is expected to forward the report to the Prime Minister’s Secretariat because Ogra falls under the administrative control of cabinet division.

The report added that the petroleum ministry dispatched teams to various places to examine the availability of petrol at the designated retail outlets.

Meanwhile, the recent fuel crisis has served to sharpen the differences between the ministry and the regulator.

A ministry official alleged that senior officials of Ogra drew heavy salaries (up to Rs400,000 per month) but they hardly did anything for the benefit of the industry or the consumer.

“The situation was better when the OCAC was directly monitoring the supply situation in the country,” he claimed.

Officials of Ogra declined to comment over the report or the supply position in the country.

From Dawn News

Pakistan will push hard for quick implementation of a long-delayed trans-regional gas pipeline from Turkmenistan in a bid to ease its mounting energy crisis, Petroleum Minister Naveed Qamar said on Tuesday. Senior officials of Turkmenistan, Afghanistan, Pakistan and India on Monday inked the framework of an agreement to construct the project with an estimated value of $3.3 billion.

The project would pump natural gas to Pakistan and India through the southern Afghan province of Kandahar, the stronghold of the Taliban and its birthplace. More energy security could ease pressure on Pakistan’s government, which faces a range of challenges, from a home-grown Taliban insurgency to what will likely be years of economic pain after summer floods caused billions of dollars in damages.

But analysts said the agreement was still at a preliminary stage and that security challenges in Afghanistan and the tensions between India and Pakistan remained an obstacle. Proposals to build the pipeline have been on the table since the 1990s but war in Afghanistan delayed the project.

“We are following a very, very aggressive timeframe to conclude agreements on this project as early as possible,” Petroleum Minister Naveed Qamar told Reuters by telephone on his way home from Turkmenistan, where the agreement was initialled on Monday. “But it’s too early to say that when these agreements will be completed and when the project will be implemented. Everything is subject to conclusion of agreements.”

The big question is can Afghanistan provide security for the pipeline? A Taliban insurgency is still raging there after nine years of war and more uncertainty is expected after US troops start withdrawing next summer. Any new tensions between arch-enemies Pakistan and India could also complicate efforts to get the project moving. Qamar said a final framework agreement is expected to be signed at a summit of the leaders of the four countries in December.

A pact covering the broad principles of sale and purchase of gas was also signed. Although some Pakistani energy officials hailed the tentative agreement, analysts say it may just be more wishful thinking. “It’s an agreement to reach another agreement without any concrete details and until then it cannot be termed as important,” said Khalid Iqbal Siddiqui, director of Pakistan’s Invest and Finance Securities Ltd. “This is not the first time it has happened.” The planned pipeline would have initial capacity for 33 billion cubic metres a year and would run for nearly 2,000 km (1,250 miles), including 735 km across Afghanistan and another 800 km through Pakistan. Natural gas to fill the pipeline could be drawn from the massive South Iolotan deposit, currently under development, and the existing Dovletabad field.

Pakistan also hopes a major gas pipeline project from Iran will help it tackle its energy problems. In March, the two sides signed a deal to build a much-delayed $7.6 billion pipeline pumping Iranian natural gas to Pakistan. That project may also be fraught with political uncertainties as the United States has been discouraging Pakistan from any deal with Tehran because of its suspected ambitions to build nuclear weapons. Iran denies it has such ambitions.

via Business Recroder

The controversy over appointment of Adnan Khwaja as MD, Oil and Gas Development Company Limited (OGDC), is setteled after appointment of Director General (DG) Petroleum Concession Naeem Malik as new MD of the company. Details via Business Recorder

Naeem is a seasoned official with wide experience of dealing issues relating to oil and gas sectors. He has also worked as DG Gas and DG Oil in Ministry of Petroleum and Natural Resources. During the short span of working as DG PC, he had settled issues of oil and gas exploration and granted record exploration licences to companies in the oil and gas sectors.

After retirement of Mahboob Shah Alam, Naeem was given acting charge of OGDC MD. Adnan Khwaja’s appointment as OGDC MD had sparked controversy. However, he resigned from this post on Thursday. The Supreme Court had also taken suo motu notice of his appointment.

We have heard about the IPI gas pipeline on and off. The agreement between Iran and Pakistan was signed for gas pipeline in march this year. The latest is that German Consultants are set to be appointed for this project. Details from paktribune are as below.

Pakistan is set to appoint ILF Consulting Engineers as the consultant for the Iran gas pipeline within six days, making first step toward the much-delayed project to meet energy shortage, a senior petroleum ministry official said on Wednesday.

“The cost of the consultancy project will be $25 million and they will have to complete the technical feasibility within 12 months,” Secretary Petroleum, Ejaz Chaudhry, told our sources. The Germany-based consultants would be working on the pipeline along with National Engineering Services Pakistan Ltd. (Nespak), he said.

According to the Iran’s state-run television, Tehran has already built most of the 1,000 km pipeline on its territory. However, the work on the remaining 900 kilometres at the Pakistani side has been pending for years.

Chaudhry said that the project was very much in hand and the ministry understood its importance in securing energy supplies for the country. “We have taken every scenario into consideration, including the sanctions against Iran.”

The petroleum ministry official said that despite threats of losing ties with US companies, investors from Dubai, China and Germany had shown interest in financing the deal, Chaudhry said. “We have targeted January 2012 to start construction of the pipeline and trust me, financiers are out there,” he added.

Iran and Pakistan signed the historic pipeline deal in March this year under which 750 million cubic feet of gas will be pumped daily by mid-2015. The 7.5-billion-dollar project, dubbed as “peace pipeline”, will snake out of Iran’s South Fars field into Balochistan and Sindh provinces.

Chaudhry said that there was a proposal to involve state-run companies in arranging funds for the project. “There is EOBI, OGDCL and State Life for making the initial investment.”

Pakistan has been looking at internal sources to fund the gas pipeline as financing from international lenders becomes shaky in the wake of UN sanctions on Iran.

According to the secretary, the Petroleum Ministry had sought legal opinion of international experts to ‘go around’ the sanctions. “We are studying every option,” he added.

Under a force majeure clause of the gas sale purchase agreement, the project can be stopped if sanctions are imposed on Iran. According to a government official, the government would setup a Liquefied Natural Gas (LNG) terminal in Gwadar if the project failed to materialise.

The case of unsolved circular debts will lead to major oil crises says Parco and PSO. This is a long pending issue and government should now step up to play its role in resolving before it becomes the reason of further loss to the economy. The business recorder news item gives the details.

The country’s oil sector’s largest giants, Pak Arab Refinery Limited (Parco) and Pakistan State Oil (PSO), have warned the government of an imminent massive oil crisis due to the unresolved circular debt problem and have urged it to arrange funds for import of petroleum products, Business Recorder has learnt reliably.

Parco has urged the government to arrange funds via PSO to save it from default on account of Letter of Credits (L/Cs) for the import of crude oil. Parco revealed that its bank borrowing was rising due to non-payment of dues by PSO with Rs 145.4 billion receivables against different clients on Thursday morning.

“We are not in a position to open L/Cs to import crude oil due to non payment of dues by PSO,” Parco management said adding that its revenue has also drastically declined due to refinery’s closure caused by floods. The cash-strapped PSO has also informed the government that the strain on its cash flows for consistently carrying such receivables has limited its ability to guarantee the supply of the products to customers. “We have already defaulted on our obligations to the local refineries which require advance payment for the supply of products which is further aggravating the company’s liquidity crunch,” PSO management says.

“Due to floods in the country, our daily collection of funds has also reduced, worsening our cash flow problems and Pakistan Electric Power Company (Pepco) is not making payments from its own bill collection,” PSO authorities said. Government is doing its best to clear outstanding circular debt, PSO management said, “however, we need immediate help to meet our LC payment commitments for imports and non clearance of dues by power sector and other clients will disrupt the entire supply chain of petroleum products.”

PSO receivables against different clients as follows: WAPDA at Rs 47.3 billion, Hubco at Rs 58.4 billion, Kapco at Rs 27.69 billion, PIA at Rs 515 million, OGDC at Rs 328 million, KESC at Rs 1.55 billion, financial charges from PIA at Rs 960 million, price differential claims (PDC) on High Speed Diesel (HSD) at Rs 1.38 billion and PDC on imported PMG at Rs 3.375 billion.

PSO owes Rs 116.97 billion dues to local as well as international fuel suppliers as follows: Rs 37.108 billion to Parco, Rs 13.723 billion to PRL, Rs 9.36 billion to NRL, Rs 24.525 billion to ARL, Rs 4.69 billion to Bosicor and Rs 26.89 billion on account of L/Cs payments and other international fuel suppliers.

For the electricity traiffs the limit is beyond the skys. What new comes in is differentiated power tariff to be implemented from September 1. The Tribune gives the details:

The federal government has introduced differentiated tariffs for electricity consumers, to be implemented on bills sent after September 1.

Based on time-of-use metering, the move would translate into a reduction from 4 paisa to 48 paisa per kilowatt hour (p/kWh) for different consumer categories.

According to a notification, the current tariffs will be maintained for peak hours while the reduction will be applicable on off-peak hours for residential, commercial, industrial and bulk users.

The reductions in off-peak tariffs are as follows: 48 paisa per kWh for residential, 24 paisa per kWh for commercial, 10 paisa per kWh for B1 and 24 paisa per kWh for B2 industrial consumers. For bulk consumers, the reduction is four paisa per kWh and 14 paisa per kWh for C-1B and C-1C categories respectively. For street lighting, the reduction is 29 paisa per kWh.

Will this reduction matter much for the consumers?

The recent floods have not only caused loss to human lives and infrastructure but the water lost was also worth to irrigate 40 million acre of land. Following excerpt gives the details:

Pakistan lost water worth Rs240 billion due to lack of dams and water reservoirs in the country.

Chairman Fauji Fertilizer Company talking to media men said a quantity of water needed for irrigating 40 million acres land has been wasted. He said Rs6 billion worth of water is required for irrigating 1 million acres land.

According to economic experts, due to absence of political harmony the country not only faced worst ever floods but also failed to store water worth Rs240 billion.

In our last post, we highlighted the lack of control of OGRA over the LPG price dynamics. Now, OGRA has taken notice of the situation and have warned all LPG marketing companies to refrain from overcharging practices and follows the authority fixed prices. This dawn news report gives the details:

Oil and Gas Regulatory Authority on Friday fixed the maximum consumer price for liquefied petroleum at Rs95 per kg and issued stern warning to LPG marketing companies involved in price manipulation.

The authority fixed the maximum reasonable consumer price of locally produced LPG at Rs80 per kg and for imported LPG at Rs95 per kg. It also determined the price for mix of local and imported LPG at Rs82.71 kg.

The prices are applicable for all the urban and rural areas of the country except AJK, Fata and Gilgit-Baltistan where additional Rs30 for an 11.8-kg cylinder may be added to each type of LPG due to higher transportation cost.

Taking advantage of the leniency of the regulator, the LPG marketing companies and LPG distributors are selling the fuel at exorbitant rates up to Rs135 per kg in some parts of the country.

Ogra Executive Director Operations Sarmad Aslam took serious notice of the situation and issued warnings to all the LPG marketing companies to refrain from overcharging and follow the prices fixed by the authority otherwise punitive action would be taken against the manipulators.

He also advised the provincial governments to ensure that no company/distributor be allowed to charge more than the reasonable price determined and fixed by the authority.

Ogra said that strict action would be taken against companies failing to supply LPG at the determined prices which include heavy fines and revocation of their licences.

The authority however maintains that LPG is a de-regulated product and its prices are determined by market forces but under prevailing conditions the authority has intervened to ensure that cartels are not formed for charging a high consumer price of LPG.

Meanwhile, Chairman All Pakistan LPG Distributors Association Abdul Hadi Khan talking to Dawn on Friday said that the current crisis had arisen after PARCO shutdown and supply curtailment from Dhodak gas fields.

However he added that Ogra and the Petroleum Ministry should take action against the cartel of local LPG producers who were minting money from the consumers rather than fixing LPG price.

He alleged that local producers were charging Rs55,000 per ton for LPG which actual costs between Rs8,000 to Rs10,000 per ton.

He further said that due to cartel of local LPG producers, importers were facing serious financial risk.

In our last post on the Synthetic Natural Gas (SNG); we discussed that LPG when mixed with air in right proportion, gives a perfect replacement for Natural Gas. While mentioning, the potential opportunities SNG can provide we said that Industries can use it as an alternate/back-up gas during the Natural Gas (NG) shutdown or curtailments times. In this post we shall discuss the importance of this alternate gas for industries and its need in the coming times.

In Pakistan, NG crisis are no different than energy crisis. Earlier we had NG shutdown hours/days only in winters, now we even have them in summers. With this happening it is easily predicted that in coming times or not thinking of far in the coming winters the NG shortage is going to get worst.

Managing Director Sui Southern Gas Company (SSGC), Dr Faiz Ullah Abbasi, has affirmed this while addressing a recent business gathering. He has said the at the problems regarding the supply of gas in the coming winter would become more serious as compared to the last year, as the demand and supply gap has started to widen.

On the other side the oil and gas sector has also fell victim to the recent floods. The Business Recorder article “Gas loadshedding crisis to further worsen ” gives more details.

The gas load shedding crisis is going to further worsen on account of 375 MMCFD gas suspension from country’s largest Qadirpur gas field because of shutdown of compressors of Sui Northern Gas Pipeline Limited (SNGPL) due to flood. While addressing a press conference, Federal Minister for Petroleum and Natural Resources Syed Naveed Qamar claimed that country had enough stock of fuel oil to meet its requirements.

“All sectors excluding domestic consumers will face more gas load shedding due to suspension of gas supply from Qadirpur gas field in SNGPL system,” Qamar said adding that effort would be made to provide maximum gas supply to power sector to avert power shortage. Minister also ruled out that flood water had entered Qadirpur gas field.

“SNGPL would devise a new gas load shedding plan for all sectors excluding domestic consumers,” Minister maintained.

More: http://www.brecorder.com/index.php?id=1090459&currPageNo=1&query=&search=&term=&supDate=

Such a situation is very alarming for all industrial sectors which are dependent on the NG supply. The shutdown will greatly affect their production process, making it slow or even reducing their full production capacity.

As SNG can be used interchangeably with NG it makes a powerful tool to strategically manage winter Natural Gas shortage or NG load shedding. The industrial sector must seriously consider opting for SNG as their can be no other permanent alternative source/back-up to natural gas.

When we have clear trade embargoes for no trade with Israel. This comes as an astonishment that how can the state oil company PSO go about a deal with an Israel based company. The excerpt from Dawn has more detail:

The Pakistan State Oil, a government-run oil company, has awarded a contact to an Israeli-based firm, Turpak-Orpak, despite the government’s ban on any kind of trade or agreement with an Israeli entity.

The matter was taken up by the Senate Standing Committee on Interior at its meeting on Monday.

The committee did not only deal with the matter of awarding a contract to any Israeli firm but also expressed doubts over the operation of the company close to sensitive installations in the country.

“It is an Israeli military establishment-funded company which is being headed by a military general,” committee’s Chairman Senator Talha Mehmood told Dawn.

“We have learnt that the company had installed its equipment close to sensitive installations and, therefore, I have ordered an inspection of the equipment to ascertain whether they are being used for monitoring purpose,” the senator said.

Mr Talha said that under SRO 76 (1) issued on Sept 2009, no Israeli company could operate in the country, but the PSO management awarded the contract to the firm in 2008.

PSO officials who attended the meeting said the contract had been awarded by the previous management and they had nothing to do with it.

Read more: http://www.dawn.com/wps/wcm/connect/dawn-content-library/dawn/the-newspaper/front-page/19-pso-grants-contract-to-israeli-firm-080-hh-10