Delay in gas pricing fuelling energy crisis

KARACHI: It would not be a stretch to call the current energy crisis Pakistan’s worst. It has impacted the country’s economy with most of the industries either facing closure or have already shut down. Production levels have taken a massive hit.

This environment has kept investors at bay. However, some continue to make efforts in the petroleum exploration and production sector, looking at new ways to overcome the energy crisis. This has also resulted in them discovering a number of new gas and oil reserves.

The power generation sector has been badly neglected by successive governments on account of various reasons including political ones. Every government has, however, announced launching projects but bore no fruit. On the other hand, no efforts were made to introduce alternate energy sources. The petroleum products’ import bill rose to an all-time high, consuming a major portion of the country’s foreign exchange reserves.

Alternate energy sources such as wind, solar among others could not be introduced despite being cost effective and achievable. It appears that officials responsible are focused only toward projects that yield them monetary benefits as well.

Rich in natural resource

Nature has blessed Pakistan with vast hydrocarbon and mineral resources, which remain largely untapped despite the success rate of Pakistan’s exploration activity being higher than countries like Canada and the US.

But like the short-term approach of every government that relies on importing petroleum products, the present one is following the same footsteps. This is not only hampering exploration activity but is consuming precious hard-earned foreign exchange reserves. Now, the government is reportedly bent upon importing LNG at very higher rates of $17 to 18 per million British thermal units (mmbtu) with a huge commission of $ 7-8. This is at a time when LNG in the international market has fallen to $10.575 mmbtu.

Import of LNG is another short-term arrangement to meet daily requirements of natural gas. The use of indigenous natural gas as fuel for transport on a commercial basis has already made the situation worse.

The use of natural gas as CNG was introduced on an experimental basis as a cheap and environment-friendly fuel for transport but its unwanted commercialisation at a rapid rate disturbed the demand and supply.

The shortage of natural gas, due to its commercial use in vehicles, not only hurt industrial activity but also affected domestic consumers. Now, the price difference between prices of petrol, diesel and CNG has reduced significantly. But the use of natural gas could not be curtailed.

In these circumstances, the newly-discovered hydrocarbon reserves are still not being utilised due to non-settlement of a long due pricing issue.

The new reserves cannot be linked to the main supply pipelines till a decision is taken regarding its price. It is high time to note that despite the available energy resources, the delay in settling the overdue gas pricing issue by the concerned departments is not understandable.

The case in India

While according to June 13, 2014 issue of upstream, in India, the gas price increase for domestic producers is on the agenda of the newly-elected government. Reportedly, the increase in gas prices effective from July 1, 2014 is likely to be based on the gas pricing formula worked out by the Rangarajan Committee, which could see domestic gas prices almost double to more than $8 per mmbtu.

Indian private sector giant Reliance Industries, UK super-major BP and Canada’s Niko Resources, partners in the D6 block in Krishna Godavari basin, are likely to be the biggest beneficiaries of the price increase. Subject to higher gas prices, these companies have plans to invest $8 billion in the next few years.

In case of a delay, these companies are determined to pursue arbitration.

State-owned Oil & Natural Gas Corporation (ONGC) will also be among the beneficiaries. A committee, headed by Dr C Rangarajan, had proposed that all domestic gas should be priced at an average of liquid gas (LNG) imports into India, US and UK trading hub rates as well as LNG imports into Japan. This formula would have led to a doubling of domestic gas price to $8.4 per mmbtu.

The new government had on June 25 deferred implementation of the Rangarajan formula till the end of September to conduct a comprehensive review of the whole issue.

According to Rangarajan formula, gas prices were to be revised every quarter, and rates would have been $8.8 per mmbtu, leading to a hike in power cost by over INR2 per unit, urea production cost by INR 6,228 per ton, piped gas by INR8.50 per kilogramme (kg) and CNG by INR12 per kg.

Pakistan also needs to devise a gas-pricing formula at the earliest to boost petroleum exploration activity, facilitating the market players and reducing the import bill.

It is unfortunate that the domestic oil and gas producers are not getting due support, which is also keeping foreign companies away.

In order to deal with the prevailing shortage of energy resources, it is the need to add newly discovered gas reserves to the distribution system by finalising the price issue. International financial institutions have already made it clear to withdraw subsidies so it is up to the financial managers to resolve this issue keeping in view the consumers and the producers interests.

E-commerce: Online shopping making its way into rural areas

LAHORE: 

The trend of online shopping has witnessed rapid growth recently with several retail market portals springing up.

But, a recent increase in their penetration into far-flung areas has also boosted future prospects of the e-commerce market. What used to be limited to metropolitan cities has now spread to semi-urban and rural areas of the country. This is another potential market not only for shopping portals but also for fast moving consumer good (FMCG) companies, due to better availability of internet facilities throughout the country.

Online shopping portal, Daraz.pk, claims that online shopping websites have penetrated into the rural areas. In a recent survey, they revealed that around 48% of all orders placed in the first six months of 2014 were outside of Pakistan’s biggest cities – Karachi, Lahore and Islamabad.

“Half the world’s population will have internet access by 2017, showcasing the potential of e-commerce in the future,” said Daraz.pk co-founder Muneeb Idrees. “It is also expected that the number of mobile-connected devices will surpass the number of people. These statistics represent the expanding ecosphere of e-commerce.”

Established in August 2012, Daraz.pk is a project of Rocket Internet, the world’s largest incubator. The portal is currently offering over 400 brands in 200 cities across Pakistan. After the initial success, other venture capital firms took notice and starting initiating contact with local businessmen in the industry to fund entrepreneurs.

The website gets receives their highest number of orders (six per cent) from Ghotki, a semi-urban area in Sindh. The highest basket size across the country was from Lala Musa in Punjab, doubling the average order size of Lahore.

“In general, more than half our orders are from outside Karachi, Lahore and Islamabad,” said Idrees. “People in smaller towns have access to social media and television. They learn about new products, but don’t have malls in their cities to buy these products.”

The e-commerce market in Pakistan is estimated at around $25-30 million, in comparison to the total retail market of approximately $42 billion. Internet availability, along with introduction of branchless banking through cellular technology, has done wonders for the market.

According to estimates, branchless banking transactions have witnessed a growth of 327% during 2011-13. Daraz.pk is one of the few businesses utilising mobile commerce in Pakistan with great numbers. The management said that 20% of the transactions of the portal take place via mobile phones.

FMCG giant Unilever recently entered in an agreement with Daraz.pk to use its marketing reach all over Pakistan for its beauty and personal care products. The management thinks that this deal could be vital for the retail industry as previously no FMCG had seriously looked into the e-commerce sector.

Guardiola: Bayern Munich need Javi Martinez replacement

With the versatile Spain international having been sidelined with knee ligament damage, the Catalan coach wants a new centre-half

Pep Guardiola has confirmed that Bayern Munich will try to sign a replacement for the injured Javi Martinezbefore the close of the summer transfer window.

The Spain international suffered knee ligament damage in Wednesday's DFL-Supercup loss to Borussia Dortmund and is now facing a lengthy spell on the sidelines.

Given the versatile Javi Martinez was set to be used predominantly at the back this season, Guardiola believes it imperative that Bayern now attempt to sign a new centre-half by the end of the month.

"He was in outstanding form," the Catalan coach told Bild. "We will miss him very much.

"We certainly need a new player. We still have 15 days and will respond."

Guardiola confirmed that he has identified several possible replacements but he refused to name names.

"We are looking for a young player," he stated. "He shall have to be big, at least 1.95 meters tall, fast, strong in the air.

"He should also be good with both his right and left foot, and flexible ... And cost little!

"But we are perhaps a little late."

Bayern have already been linked with Roma defender Mehdi Benatia, Liverpool's Daniel Agger and Diego Godin of Atletico Madrid.

Mourinho: I'm not thinking about Cech's Chelsea future

The Blues boss says there have been no offers for the Czech and he welcomes the selection headache Thibaut Courtois's return has triggered

Chelsea boss Jose Mourinho has rubbished suggestions there have already been bids for Petr Cech but admits he has yet to tell the squad who the first-choice goalkeeper will be this season.

Cech, who has been the Blues' first-choice shot-stopper for a decade, faces fresh competition for a starting berth from Thibaut Courtois, who has at last returned from his three season-long loan spell at Atletico Madrid.

The Belgian's presence has thrown Cech's future into doubt, with Goal understanding he will be allowed to leave Stamford Bridge this summer, and Mourinho is not ready to consider the prospect of the Czech leaving until a bid has been made.

"In this moment I don't want to think about it because there is no offer, there is no possibility," said the Chelsea boss when asked if Cech's time at Stamford Bridge could be over.

"I'm working with them and I told them as a group today that every one of my players in the squad I'm happy to have. I'm not waiting for anything. It's not good to analyse something that is not on the table."

On the subject of who his No.1 will be against Burnley, he added: "I don't tell you because they don't know. The keepers don't know and the team doesn't know and they will know at the same time, all of them. 

"In my opinion Chelsea has two of the three best goalkeepers in the world. This is unique. Is this [choosing between them] a problem for me? A great problem. 

"They are both fantastic goalkeepers, even [Mark] Schwarzer, obviously in a different age and a different level at this moment. To have Cech and Courtois is a good problem."

Reus has never been on Atletico's agenda'

The club´s CEO says the Spanish champions are pursuing a different type of player following reports linking them with a bid for the German

Borussia Dortmund star Marco Reus has never been a transfer target for Atletico Madrid, according to the Spanish champions' CEO Miguel Angel Gil Marin.

Reports emerged in Spain this week claiming Atleti had lodged a bid for the Germany winger as they look to bolster their forward line following the sale of Diego Costa and injury to Arda Turan.

However, Gil Marin has made it clear the club are pursuing very different targets to the 25-year-old.

"Reus has never been on Atletico's agenda and his profile does not fit with what the team currently need," he told TVE.

Reus has been the centre of transfer speculation this summer, with reports over a possible bid from Bayern Munich causing friction between the two clubs, despite Pep Guardiola's insistence that he did not deem the player a necessary signing for the German champions.

The attacker has also been linked with a possible switch to the Premier League, with Arsenal and Manchester United credited with an interest.

Reus' current contract with Dortmund expires in 2017.

The power behind Shahid Kapoor’s throne

MUMBAI: 

“This is the tragedy of a man who could not make up his mind.” These are the opening words of Lawrence Olivier’s 1948 film adaptation of Hamlet. Not only are we reminded of these words because Shahid Kapoor will soon be seen in Vishal Bhardwaj’s depiction of the Shakespearean tragedy, but also because, interestingly, they seem to epitomise the actor’s career trajectory.

With a diverse palette of films that ranges from the coming-of-age love story Ishq Vishk(2003) to caper thriller Kaminey (2009) to masala film R… Rajkumar (2013), Kapoor has been swaying back and forth in terms of his film choices. But, with his upcoming film Haider(an adaptation of Hamlet), he might just be able to find his strong suit in the industry.

Kapoor feels, “An actor works with all kinds of directors. When he (Bhardwaj) wrote the script of Haider, he called me and said ‘You are very lucky. Whenever I cast you in any film, your role is written really well.’” He added, “I guess, he is really lucky for me. I have never received this kind of response for myself.”

The actor’s look in the trailer of Haider has aroused curiosity among both the critics and audience as it is being touted as his most refined performance to date. Accompanied by co-star Shraddha Kapoor and Bhardwaj at a promotion event for Haider, Kapoor spoke about the magic that Haider seems to be spinning for him already.

“It happened with Kaminey. People reacted to the look and the vibe. Nothing happened for four years and now, after five years, it is happening again. I owe a lot of my career to Bhardwaj,” he shared. Kapoor was scared to go bald for the film and that, too, for just one day of shoot, but his passion for making Haider possible made him do it. “It’s the most difficult role I have done in my career, I would say. It’s definitely a very intense character.”

“But this is the kind of film that you do from your heart and for your heart, and there are others that you do for box-office numbers,” he commented. Haider is all set hit the theatres on October 2 this year.

LNG supplies: SSGC to consider paying Rs10b capacity charges

ISLAMABAD: 

The management of Sui Southern Gas Company (SSGC) may face a hard time in winning the board’s seal of approval for payment of Rs10 billion per annum capacity charges to Elengy Terminal Pakistan Limited (ETPL) for handling liquefied natural gas (LNG) imports, a burden which will eventually be borne by consumers.

The Ministry of Petroleum and Natural Resources is pressing SSGC’s management to get approval of the capacity charges and even the company’s board of directors has come under pressure to give its nod, officials say.

ETPL is constructing an LNG terminal at an estimated cost of $150 million and will receive $100 million per annum as capacity charges even if there is no LNG supply.

ETPL, a wholly owned subsidiary of Engro Corporation, had won the bid for LNG terminal services and quoted a tolling fee of 60 US cents per million British thermal units (mmbtu).

The SSGC’s board of directors is expected to meet on August 23 to consider giving approval to payment of capacity charges.

However, officials said, the management may face resistance as some board members had decided to oppose such high capacity charges. The board will consider providing around $50 million worth of standby letter of credit in favour of ETPL to cover six months of capacity charges.

According to the LNG terminal services agreement between ETPL and SSGC, the latter has to arrange around $50 million to cover capacity charges for six months. However, banks have indicated that the letter of credit will depend on signing of the heads of agreement – a non-binding document outlining main issues relevant to a partnership – between PSO and LNG suppliers before August 28.

According to officials, Pakistan State Oil (PSO) – the state-run oil marketing company –has provided a comfort letter to SSGC against capacity charges, but it is not acceptable without signing a deal with the LNG suppliers.

Talking to The Express Tribune, ETPL Chief Executive Officer Imran Sheikh said SSGC had not yet provided the standby letter of credit and clarified that the $50 million amount was not true as the gas utility would be paying less than that.

SSGC would pay in line with import of 200 million cubic feet of LNG per day (mmcfd) in the first year and 400 mmcfd next year, he said.

However, the capacity charges had sparked concern among economic decision-makers, who asked PSO to carry out due diligence before issuing the letter of comfort for gas import.

The Economic Coordination Committee (ECC), in a meeting on February 28, was upset to know that PSO would issue the letter and pay millions of dollars in capacity charges even it was unable to import LNG from Qatar.

It was of the view that this would put a big burden on taxpayers. “The federal government controls PSO, so the letter of comfort would have a bearing on taxpayer’s money. Therefore, before issuing the letter, PSO should carry out due diligence,” the ECC noted.

However, ECC members stressed that the LNG services agreement was a commercial contract between two entities – SSGC and ETPL – and their boards of directors were fully competent to grant approval in respect of the accord.

They termed the project important keeping in view a significant decline in natural gas production in the country because of fast
depleting reserves.