Construction work on first private sector LNG terminal to start in January

ISLAMABAD (Dunya News) – A multinational company will start construction on first merchant Liquefied Natural Gas (LNG) terminal in the country by end of the next month [January] after the government opened up the energy sector under its ease-of-doing-business strategy.

“A vibrant structural framework is very much in place under which construction work on the first private sector LNG terminal will start by end of the January, while the physical work on another merchant terminal to commence in second half of the year 2021,” a senior official privy to the petroleum sector developments said.

He said Oil and Gas Regulatory Authority was due to issue the licence for construction of a terminal within a day or two, adding all agreements, permissions and arrangements in that regard had almost been finalized.

After setting up the terminals, he said, the companies would import and sell the commodity on their own without any involvement of the government except regulation matters.

Replying to a question, the official said a formula already existed under which private sector could import LNG as per its requirements, get it injected into existing gas transmission network and receive at industrial units.

Currently, he said, two LNG terminals were operating at Port Qasim Karachi and injecting around 1,200 MMCFD gas in distribution network of Sui Northern Gas Pipelines Limited and Sui Southern Gas Company.

Replying to a query, he said the previous government itself made long term LNG import contracts at exorbitant rate involving billions of dollars financial commitments.

But, the Pakistan Tehreek-e-Insaf (PTI) government was importing additional LNG at around 20 to 25 percent reduced rate for the last one-and-half years as compared to the old deals made by the previous regime.

Explaining the government’s winter gas load-management strategy, a spokesperson for the Petroleum Division has recently said that around 30 percent additional supply of Liquefied Natural Gas (LNG) had been procured for the next month [January] as compared to the same period of 2018.

“Pakistan will be moving 30 percent more LNG molecules in this January compared to January 2018, at the cheapest ever price of $6.34 [per MMBTU]for a peak winter month,” he said.

He said the government had arranged 12 LNG cargoes for January 2021. “One cargo that was scheduled for 30th December, and was intended to supply for January 2021, has been moved a few days ago into January. In addition, the volume [gas supply] has been increased in certain cargoes.”

The Petroleum Division (PD) also shared a comparative statement about purchase of the LNG for a period from December-2017 to January-2021, which reflected that the present government procured the commodity at the lowest rate for the current and next months.

It said the government had obtained as many as 12 and 11 LNG cargoes for the months of December-2020 and January-2021 at the average cost of $ 6.35 and $ 6.34 per MMBTU (Million British Thermal Unit), respectively.

Making the comparison, the PD said, in December-2017 and January-2018 nine cargoes were purchased each in two months at the rate of $ 7.50 and $ 8.49 per MMBTU gas, respectively.

While in December-2018, as many as eight LNG cargoes were acquired at the rate of $9.73 per MMBTU and 10 ships at the average cost of $ 8.82 per MMBTU in January-2019.

Similarly, the PD said, the government procured 10 and 11 cargoes in December-2019 and January-2020 at the rate of $ 7.81 and $ 7.61 per MMBTU, respectively.

The country’s existing natural gas reservoirs are depleting fast at a rate of 9.5 percent annually, and the LNG is the only available instant remedy to bridge the increased gap between demand and supply of the country.

Currently, the country’s indigenous gas production is around 3.7 Billion Cubic Feet per day against the demand of 6 BCFD.

According to a recent report of Oil and Gas Regulatory Authority, the gap between demand and supply of gas could increase by 5,389 Million Cubic Feet per Day (MMCFD) by 2029-30.

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