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| Shell joins 4gas in LNG import project |
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Saturday, August 08, 2009
By Saad Hasan
KARACHI: Petroleum giant Shell has agreed to participate with 4gas in Pakistan’s first liquefied natural gas (LNG) import project, an official overseeing its details told The News.
With Shell becoming part of Mashal LNG project, it would open up sources of gas supply from around the world for the energy-starved country, he said.
“This is a significant development as having one of the biggest oil companies onboard means that all LNG suppliers are looking at us,” he said, recalling that just eight months ago market players were not even interested in discussing investment prospects.
British Shell and Carlyle Group’s 4gas separately showed interest when Mashal LNG was tendered in 2005. Subsequently, 4gas was issued exclusivity letter by the government that brought it close to the actual award of the project.
Negotiations got delayed on this vital project which envisages import of 500 million cubic feet of gas a day (mmcfd) by 2011-12. Pakistan, which uses gas to run everything from industry and power plants to stoves at home, is already short on indigenous supply.
The $700 million project comprises a floating terminal and storage tanks built onboard a ship, which will be chartered for the duration of the contract. All the investment is being made by 4gas. Work on the project, including dredging and pipelines, is slated to start by December 2009.
“It is very important that this project goes ahead on time,” the official said. “We don’t have a choice; it’s a matter of survival. It’s either LNG or more expensive fuel oil.”
The price of LNG was yet to be decided but it would be less than the cost of furnace oil in any case, he said. “It must be understood that furnace oil will be in short supply in coming years. The modern, deep conversion refineries will have little capacity to produce it.”
The agreement between the government and 4gas carries a take or pay clause which means authorities have promised to buy LNG from Mashal developers for at least five years.
There will be a terminal tariff added to the cost of gas to cover charges of the ship which will remain berthed at the Port Qasim for the tenure of the contract. Tariff will range between $0.4 and $0.5 per million British thermal unit (MMBTU).
Significantly, having re-gasification facility and storage tanks onboard a ship has eliminated the capital cost of same structures if built on land. “Building the plant and infrastructure on ground would have cost a lot and taken many years.”
Shell has a 30 per cent stake in some of Qatar’s vast gas reserves. 4gas will come back to the government by the end of next month with details of envisaged supplies.
Pakistan is already suffering from severe energy shortage, worsened by depleting gas reserves. The multi-billion-dollar gas pipeline project with Iran has still not been finalised.
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ISSN 1563-9479 
