PTI’s poor policy on LNG irks energy players

LAHORE: As Pakistan Tehreek-e-Insaf government completes its first 100 days in power, energy players worry over conflicting signals from the policy makers about working of liquefied natural gas (LNG) market.

In early days of the new government, federal ministers initially did opt for a supportive LNG policy, outlining its priorities to further utilise regasified liquefied natural gas (RLNG) for meeting energy needs as well as initiation work on new terminals.

However, later statements from Ministry of Petroleum about reviewing agreements relating to two already set up LNG terminals and vague policy about new investment for expanding the LNG infrastructure caused discomfort among the players, industry insiders said.

LNG players are not only worried about the not-so-friendly statements, but also lesser import of gas in the early months of the present government compared with the corresponding period of last year.

Despite facing widening gap between demand and supply of natural gas, new terminal set up last November by Pakistan GasPort was running on less than one-third of its capacity during the August-October 2018 period. Pioneer LNG terminal established by Engro back in March 2015 has also not even been at last year’s level during the same period.

The average monthly LNG import through Pakistan GasPort Terminal was just 0.103 million tons during August-October 2018 against its monthly capacity of 0.466 million tons. On the other hand, the LNG imports via Engro LNG terminal were 1.167 million tons during the period under review against 1.168 million tons imported last year during the same period. As a new source of energy, RLNG has been playing a pivotal role in the primary energy mix of Pakistan since early 2015 with the opening of import window. So far, the country has imported approximately 10 million tons LNG on the back of these flawlessly operated terminals, providing natural gas into the national network.

Industry analysts fear that conflicting statements from the government indicated a multifaceted plot to roll back the LNG market. Such policy change was bound to make energy outlook bleak and could end up pushing the whole country back into a severe energy crisis, they observed.

Adding fuel to controversy, the federal government recently hinted at shifting two existing LNG terminals to other locations on safety and other grounds. The Ministry of Maritime Affairs claimed an additional $14 million financial loss due to the current location of the terminals.

It has been claimed that the LNG terminals have been set up without conducting any safety study; hence the government is planning to shift these terminals to other suitable places.

Industry insiders believe that the relatively increasing number of LNG cargo ships could be one of the reasons of congestion at port. To resolve this issue, Port Qasim Authority (PQA) needs to improve the channel for ships manoeuvrability and spend money on new entry points. There is no issue of funds as PQA is earning a lot of revenue through LNG imports. On the other hand, the lesser reliance on RLNG for power generation is another disturbing development for the LNG market. Power Division has reportedly reduced intake of LNG for power generation by over 50 percent for winter months.

It is clearly a departure from the government’s earlier commitment to give priority to RLNG over liquid for generating power, said industry insiders.

Such mishandling of affairs of energy market is rattling the confidence of the existing as well as potential investors, creating an unfavourable business climate. “We think that in such an environment, the working of existing LNG terminal and plans of investment in new terminals could be badly hit, dampening investor sentiment,” said a senior official working with an LNG terminal.

“Instead of adopting investor and business-friendly policies, it seems that the new government unfortunately wants to demoralise existing energy players due to reasons better known to them,” he said. Established in March 2015, the Pakistan LNG market is currently striving to come out of infancy in a bid to start consolidation. The transition from one-buyer and one-seller model to multi-buyer and multi-seller approach has strengthened the foundations of the LNG industry lately.

Moreover, the diversification of upstream and downstream LNG flows, involving several key energy giants hailing from different countries and multiple uses of RLNG by various consumer categories is a clear indication that Pakistan’s LNG market is on a sound footing.

Such transformation of LNG market will greatly contribute in energy security and eventually bring the landed cost of imported gas down on the back of stiff competition.

Both the existing LNG import terminals have been set up under LNG Policy 2011. These terminals have been set up through proper channel.

Together with world class partners and reputed international consultants for developing such infrastructure, the two players have gone through all prerequisites for establishing such sensitive energy infrastructure. In addition to getting approvals from the port authorities and other institutions, leading engineering and consultancy firms played their part in ensuring safety, environmental management, socio-economic, geo-technical and geophysical modelling for projects.

The existing LNG terminals have been established as a result of extensive independent safety audits done as part of tender process. The risk assessment relating to manoeuvrability for sites both cumulative risk impact and societal risk has been fully evaluated before initiation of these LNG terminals. Navigation simulations have also been run for sound transportation of the LNG cargoes. These studies have assured that the proposed project sites comply with international risk guidelines, codes and standards and industry practices.

While following LNG Policy 2011, all the studies represent that the LNG terminals are viable and sustainable in context of safety, environmental, economic, and social impact, said market insiders.