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Friday March 29, 2024

LNG worth $16 billion

By Dr Farrukh Saleem
January 10, 2016

Capital suggestion

On April 8, 2012, Dr Asim Hussain (SI, HI), the-then advisor to the prime minister for the Ministry of Oil and Natural Resources, said: “LPG is the only solution to our gas crisis”. So, what do we do? We go out and start building LPG terminals (the LPG terminal we built back then is no longer of any use).

On November 5, 2013, Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi, said: “LNG is the only solution to energy crisis”. So, what do we do? We go out and start building LNG terminals.

The Ministry of Oil and Natural Resources is now dying to finalize a 15-year, $16 billion, ‘take or pay’ liquefied natural gas (LNG) deal with Qatar (under the agreement we would have to pay whether we lift LNG or not).

On April 30, 2014, Sui Southern Gas signed a 15-year agreement with Elengy Terminal Pakistan Limited, a 100 percent owned subsidiary of Engro, under which we pay $272,479 per day every day of the year – that’s a wholesome $100 million a year every year for the following fifteen years (whether we use the terminal or not).

The Central Development Working Committee (CDWP) has now allocated a colossal Rs162 billion for LNG-based power projects. The National Transmission Distribution Company (NTDC) has allocated an additional Rs7 billion. The government is planning LNG-based power plants in Kasur, Jhang and Bhiki each valued at some $1.2 billion. The LNG-based power plants in Faisalabad and Multan will cost $250 million each. And then there are LNG-based power plants in Shahdara, Sukkur and Peshawar each costing $125 million.

On October 17, 2015, Pakistan and Russia signed a loan agreement in the amount of $2.5 billion for a 1,100 km pipeline to carry imported LNG from Karachi to Lahore. The North-South Pipeline will be capable of carrying 12.4 billion cubic meters of LNG per year connecting LNG terminals in the port city of Karachi to consumption centres around Lahore.

On November 5, 2013, the day Shahid Khaqan Abbasi, the federal minister for petroleum and natural resources, said: “LNG is the only solution to energy crisis” the international price of oil was $106 a barrel. Lo and behold, oil has since come down to under $35 a barrel.

Goldman Sachs, the multinational investment banking firm founded in 1869, now says that the “global surplus of oil is even bigger than Goldman Sachs thought and that could drive prices as low as $20 a barrel.”

Why is the price of oil dropping like nine pins? According to the New York Times it is “simple economics of supply and demand……Untied States domestic production has nearly doubled over the last six years, pushing out oil imports that need to find another home. Saudi, Nigerian and Algerian oil that once was sold in the United States is suddenly competing for Asian markets, and the producers are forced to drop prices.

“Canadian and Iraqi oil production and exports are rising year after year. Even the Russians, with all their economic problems, mange to keep pumping. On the demand side, the economies of Europe and developing countries are weak and vehicles are becoming more energy-efficient. So demand for fuel is lagging….”

Lo and behold, for us it would be much cheaper to produce electricity using furnace rather than LNG.

The writer is a columnist based in Islamabad.

Email: farrukh15@hotmail.com Twitter: @saleemfarrukh