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| Liquefied natural gas import |
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Team leaves for Qatar to meet Shell officials
Friday, October 02, 2009
KARACHI: A Pakistani delegation, led by GA Sabri, the special secretary of petroleum ministry, will leave for Qatar on Friday to meet officials of oil industry giant Shell in a bid to secure supplies of liquefied natural gas (LNG).
Pakistan, which heavily depends on gas as a fuel to run its economy, is facing a severe energy crisis and the import of LNG has become imperative since local reserves are fast depleting, industry people told The News.
Shell has a 30 per cent stake in Qatar Gas 4, an LNG train with capacity of 7.8 million tons per annum.
The deal is crucial for Pakistan which has to make its presence felt as an importer at a time when countries in the region like India are placing large LNG orders. Pakistan’s first LNG import project, Mashal, is being undertaken by a foreign firm 4gas. The project comprises a floating terminal equipped with a degasification plant and storage tanks onboard a ship.
Analysts say LNG will be more expensive than locally-produced gas which is priced at an average $4 per million British thermal unit (mmbtu). However, LNG will be a cheaper alternative to fuel oil, which is excessively being used to run thermal power plants.
Earlier, Shell and 4gas had agreed to participate in the Mashal LNG project. It is not known why that arrangement did not work out. Now 4gas has told the government it will bring LNG from Algeria. British Shell and 4gas had separately shown interest when Mashal LNG was tendered in 2005.
Subsequently, 4gas was issued exclusivity letter earlier this year by the government that brought it close to the actual award of the project. Negotiations lagged behind 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 its indigenous supply. The $700 million project consists of a floating terminal and storage tanks built onboard a ship, which will be chartered for 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.
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 5 years. There will be a terminal tariff added to cost of gas to cover charges of the ship, which will remain berthed at Port Qasim for the tenure of the contract.
Tariff will range between $0.4-$0.5 per million British thermal unit (MMBTUs). Significantly, having re-gasification facility and storage tanks onboard a ship has eliminated capital cost of same structures if built on land. —SH
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ISSN 1563-9479 
