Pakistan govt awaiting LNG imports
The Pakistan government is confident that the import of liquefied natural gas — initially exclusively for the power sector — will start in March.
Meanwhile, Engro, which is building the dedicated LNG terminal at Port Qasim, is a little anxious. It feels that at the current pace of progress on the proposed LNG import deal, LNG vessels may arrive long after its terminal is ready.
Government functionaries have assured the public that the higher price of imported gas will not cast a shadow on Sui gas’ pricing for other categories of consumers, particularly households.
The government intends to import up to 4m metric tonnes of LNG in 2015, at an estimated cost of about $2.5bn, Dawn has learnt.
Under its deal with the government, Engro will charge 66 cents per mmbtu of LNG for handling and transmitting the gas to Sui Southern Gas Company (SSGC).
“We dread ending up a loser despite fulfilling our side of the deal. Our fear, at this point, is the cost of an idle dedicated terminal facility. The deal has no government guarantees,” Ali Ansari, President and CEO of Engro Corp, shared his apprehensions with this writer at his office in Karachi.
The government feels that the company’s nervousness is understandable, to some extent, but the downside is being overblown to feed pessimism.
“There is a lot of resistance, at every step, facing progressive initiatives because of bureaucratic inertia and the machinations of vested interests. I can tell you with full responsibility that the LNG import deal will be finalised and the import will start as soon as the terminal becomes functional,” Shahid Khaqan Abbasi, the federal minister for petroleum and natural resources, told Dawn from Islamabad over phone.
“We intend to import 400mmcfd LNG annually, initially only for the power sector. According to internal studies, it will provide over $1bn in savings over the current liquid fuel spent in the sector and 40pc more power generation in the country,” asserted Abbasi, who enjoys goodwill in business circles.
He listed companies that have shown interest in the multi-billion-rupee LNG import contract. Most of these are Asian, but a few are Western and one is local. The list includes Shell Dubai, BP Middle East/Dubai, Mitsubishi Corporation Japan, EDF Trading UK, Mitsui & Co Japan, Trafigura UAE, Global Energy Infrastructure Ltd Turkey, Vitol Dubai/UAE, Mercuria Energy, UAE, Lucky Commodities Pakistan, Total France, Excelerate Energy US, and Gunvor Singapore.
The petroleum minister categorically said there will be no effect on the price structure, and consumers will pay the full cost of the imported LNG.
PSO, stated to be involved in the LNG import exercise, declined to comment on the issue. “Let the ministry speak on behalf of all attendees. I am sorry, but we would not like to say anything at this stage,” the corporate media cell gave a measured reply to a number of questions.
Talking about the terminal, Ansari said it took his team some effort to convince the board of directors to commit the company to a project that could drain it dry.
“We accepted the challenge to establish and operate an integrated LNG import terminal at the cheapest market price, in record amount of time. Despite all odds — which included securing NOCs from 34 different civilian and defense establishments — we surprised even ourselves by the pace of work on the project,” he claimed.
The project, which Engro pledged to deliver in March 2015, will probably be ready before the deadline, he said.
“Half way through the available time limit, the company is convinced that it will not just complete the terminal but also lay the pipeline to transmit the product to SSGC, the identified buyer.”
He said the terms of the deal were stringent, as it imposed a penalty for delays in the commissioning of the project beyond the stipulated time. “The deal binds the successful bidder to commission a project, which typically takes two-and-a-half years, in 11 months,” the CEO said.
Elengy Terminal Pakistan, the subsidiary of Engro Corp, was created to establish and operate the terminal for handling, regasification, storage, treatment and processing of LNG, regasified LNG (RLNG), liquefied petroleum gas, natural gas liquid (NGL) and other related liquids, gases and petroleum products. The project can be scaled to handle 1,000mmscfd RLNG at an aggregate cost of $200m.
Replying to a question about how Engro managed to reduce the time and cost to qualify for the bid, Ansari said: “The financial close took six months and erecting a new jetty would have taken longer. We decided not to borrow from outside and use our old jetty for the terminal to save time and cost”.
Petroleum Minister Abbasi had reportedly chaired a meeting last week where all relevant ministries and departments reviewed the project’s progress, and decided to expedite the process of LNG imports.
According to a source, Finance Minister Ishaq Dar has directed the petroleum and water and power ministries to devise a mechanism for the import, pricing and distribution of LNG in consultation with the finance ministry and report back to him.