400MMCFD LNG terminal to contribute 5pc to Pakistan’s primary energy mix
The imported Liquefied Natural Gas (LNG) is not only a cheaper source to meet Pakistan’s energy needs with saving massively to the national kitty but it will also prove a game changer as 400 mmcdf LNG terminal would add five percent to the country’s primary energy mix. In the past, three governments made five attempts over the 10 years to import LNG but they failed for adopting integrated approach where LNG terminal developer was also LNG supplier.
The PML-N government resorted to un-bundled approach and the LNG terminal development was separated from LNG procurement, thus succeeding to provide the country with its first LNG based gas within 20 months of its tenure, Federal Minister for Petroleum and Natural Resources, ShahidKhaqanAbbassi said while addressing a recently held seminar on import of LNG.
The government pursued a transparent process for developing a terminal and the EngroElengy built the SSGC LNG regasification terminal in a record time as the contract was signed on April 2014 and first gas flow was ensured at March this year.
Average regasification tolling fee was charged at $0.66 per MMBTU which was the lowest in the world, adding most LNG contracts in the world were priced at direct linkage to oil and Pakistan LNG imports would also be linked to oil.
The government was displacing oil products and LNG price at 15 percent of Brent index of $50 percent would be $7.5 per MMBTU.
Since the country’s natural gas production was stagnant at 4,000 mmcfd per day for 10 years and constrained demand stood at 6000 mmcfd with hydrocarbon resources fast depleting, thus he said government ventured into LNG import.
If Pakistan had committed to LNG 10 years back, the country would not have any energy crisis, today. Pakistan needed to import natural gas through pipelines or LNG, but in fact Iran-Pakistan Pipeline of 750 mmcfd project was delayed due to international sanctions and the first gas could not be available before end of 2017.
In addition, Turkeminstation-Afghanistan-Pakistan-India(TAPI) pipeline with 1325mmcfd also got delayed due to Afghanistan instability and structural issues with the project transaction and first gas was not available before end 2019. In such situation, the government venture into the LNG import through long term contracts, medium term contracts and sport purchases, adding LNG Supply Contract(SPA) between Pakistan State Oil(PSO) was finalized.
He said cost calculations proved that RLNG was a cheaper than all imported fuels and the OGRA had determined RLNG price of 8.64 per MMBTU. So far 14 LNG cargoes had been regasified at the LNG terminal, adding the one year contractual commitment was 24 cargoes, but the number could go up in one year to 26 cargoes. He said six cargoes were procured on spot basis from Qatar gas FOB basis and eight cargoes were procured through competitive bid process, adding average price of LNG cargoes procured was less than 14 percent of Brent. He said power generation based on 4000 mmcfd of regasified RLNG would generate additional annual generation of 9 billion KWH, saying from $600 million to one billion dollar. Similarly with under-construction of 3600 MW RLNG based powerplants would generate of 30 billion KWH, saying over$ 2billion annually.
The government needed to sign five more contracts to import LNG, as currently, the minister added, currently LNG cater to the 20 percent of the country’s energy needs. He said government had allowed the private sector to import and use LNG, testifying its sincere efforts to further improve economic indicators. He said each consumer would have to afford its own burden while consuming LNG and burden would not be shifted to any other sectors.
