KARACHI: Pakistan’s upcoming liquefied natural gas (LNG) terminal is expected to rack up five billion dollars in annual turnover as there is an immense demand of the fuel for power generation and transportation sector in the country, people with knowledge of the development said on Tuesday.
The country is to have its one-of-a-kind third LNG terminal – a joint venture of Shell, Engro, Gunvor and Fatima Group – by the 2nd quarter of 2020, they said.
“We will not be selling terminal services, but RLNG (re-gasified),” Engro’s spokesman told The News, referring to the existing two terminals that provide re-gasification services, but the government imports LNG.
“The RLNG will be priced to provide a competitive alternate solution to the private sector,” the spokesman added. “If the terminal runs on full capacity and sells the regasified LNG to private sector such as CNG (compressed natural gas) sector its annual turnover would be around $5 billion.”
The terminal will have the re-gasification capacity of 750 million metric cubic feet/day.
Pakistan has become the sixth largest LNG market in recent years with two LNG facilities of 1.2 billion cubic feet/day established in the last government of Pakistan Muslim League (Nawaz).
Engro’s official said the merchant LNG terminal is an entirely new business model.
“The integrated solution has not been implemented in Pakistan to date,” he said. “All of the development works are near completion. Engineering, procurement and construction (EPC) contract and letter of intent have been awarded and floating storage re-gasification unit technology has been selected.”
Also Read: Pakistan LNG tender cancelled on high prices
In 2016, Shell Exploration Company BV, Engro Elengy Terminal Limited and Pakarab Fertilizers Limited (a Fatima Group company) signed a non-binding cooperation agreement to assess the feasibility of, and develop a full service LNG re-gasification terminal at Port Qasim. Guvnor SA was also inducted into the project as a project partner as well as LNG supplier.
“Developing a privately-funded integrated LNG import project linking LNG supply to downstream gas markets will help bridge the LNG supply gap, bring further foreign direct investment, provide additional security of supply to power, industrial, and CNG sectors, significantly transfer the financial burden and risk from the public to the private sector and contribute tax revenues,” an official at Shell Pakistan said, requesting anonymity.
The official said Oil and Gas Regulatory Authority advanced both its EPC and time charter party agreement, and is in the process of finalising the other project agreements, for example the terminal use agreement.
Analysts said the new government will have to resolve the gas pricing issue as imported gas is very expensive compared to domestic gas. Imported gas follows international market whereas domestic gas pricing is set under political consideration.
Imported gas is, however, extremely cheaper alternate to furnace oil, diesel, motor gasoline and liquefied petroleum gas. It gives huge cost benefits in transport and power sectors.
“If domestic gas is depleting with increasing demand then market forces should come into play to settle the pricing,” an official said. “Furthermore, the tax regime should be reviewed and rationalised if the government intends to promote the private RLNG market.”
An official said pipeline capacity is also becoming a challenge. With all imports coming into the southern ports and major consumer hubs in the north of country, the government needs to facilitate capacity allocations in the existing grids, and expeditiously execute new pipeline projects.
(This news/article originally appeared in The News on September 5th, 2018)