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China to build two RLNG terminals at Gwadar

By Khalid Mustafa
November 07, 2016

ISLAMABAD: In a major development, Pakistan has managed to get the two RLNG terminals deal at Gwadar done with China. With the change of the mode from built, own, operate and transfer (Boot) to engineering procurement construction-financing (EPC-F), the country will be exposed to a mammoth saving of one billion dollars in 25 years just in the head of tolling fee.

The RLNG terminals will re-gasify the LNG of 1.2 billion cubic feet gas per day (bcfd). The terminals will be installed at Gwadar under government-to-government mode.Under the EPC-Financing mode, tolling fee that also includes the re-gasification charges of each RLNG terminal will be reduced to 30-32 cents per MMBT from the tariff of 40-45 cents earlier worked out under the BOOT mode. This will provide a solace of $25 million a year and if it is calculated on 25 years, the benefit would last up to $500 million, Managing Director of Inter State Gas System (ISGS), Mubeen Saulat, told The News.

However, the cost of one RLNG terminal is likely to be finalised soon somewhere between $280-$300 million. The  Chinese company will construct another RLNG terminal at the Gwadar Port. In this way, the cost of two terminals is to hover at $315 to $340 million, which will be really a great achievement.

“At the outset, only one RLNG terminal was negotiated with the Chinese company, but the second RLNG terminal will also be built under variation order of 15 percent and this is very much allowed under the PPRA rules.”

He said in case, the second RLNG terminal was built separately, then the cost would certainly surge by 50 percent. Interestingly, Engro RLNG per MMBTU on re-gasifying 400 MMCFD LNG and LNG terminal-2 that is to commission by June 2017 will be charging 41.77 cents per MMBTU on re-gasifying 600 MMCFD, but the Gawadar RLNG terminals are to charge 30-32 cents per MMBTU, meaning by that each will re-gasify 600MMCFD LNG. This shows that the Gwadar RLNG terminal deals are the best ones in terms of competitiveness. To a question Saulat said that ISGS not only will arrange the

Explaining the deals’ salient features, both the countries are earlier negotiating the installment of RLNG terminal at Gawadar under BOOT basis, but Chinese side argues that project will take time under BOOT basis. However, Chinese company said it had no objection in erecting the terminal even under BOOT basis. Just with change of mode from BOOT to EFC-Financing mode, on each terminal, there will be a mammoth saving of half a billion dollars. However, if second one is built by the same Chinese company under variation order, it would cost just $30 million.

China Pipeline Petroleum Bureau (CPPB) that has been assigned to build the 700 kilometers LNG pipeline from Gwadar to Nawabshah will also construct the two RLNG terminals.

Saulat also says that the 700 kilometers RLNG gas pipeline from Gwadar to Nawabshah will now 1.950 bcf per day (1.2 bcfd from two RLNG terminals and 750 mmcfd from Iran when it is to be connected to Iranian border). However, in the pipeline, now four gas compressors will be installed as against the three for smooth transpiration of almost 2 bcfd gas per day.

The price negotiating committee has finalized the cost of RLNG pipeline project at $1.353 billion. The price is more competitive even than the project of argumentation in gas network pipeline carried out by both Sui Southern and Sui Northern. In addition to 700 kilometers of the LNG pipeline, another 12 kilometers pipeline will also be constructed from the main pipeline to RLNG terminals.