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January 31, 2019

Govt likely to allow private LNG importers

Top Story

January 31, 2019

ISLAMABAD: The federal government is likely to allow the usage of idle capacity at country’s 2nd LNG terminal to private LNG importers to improve availability of LNG for different industries and optimum utilisation of the LNG terminal.

The 2nd LNG terminal did not operate at full capacity during 2018 whereas the government paid it 100% capacity utilisation charges as per contract. After accounting for public sector LNG demand for 2019 for both first and second terminal, nearly half of the capacity for 2nd terminal is likely to remain idle during 2019.

A summary to this effect is likely to be moved before Economic Coordination Committee (ECC) very shortly and appears to be a win win for all involved. Due to non-utilisation of 2nd LNG terminal in 2018, millions of dollars have been paid to the operator without utilising the terminal capacity which has been passed onto the consumers. It’s a timely and much needed decision to save similar wastage in 2019 and is a well thought move by the petroleum division and the Finance Ministry seems to agree with the proposal. The decision will save the government foreign exchange exposure whereas a higher quantity of LNG will be imported into Pakistan.

The proposal in this regard is based on calculating all demand by Ministry of Energy for both terminals and using the idle capacity for 2nd for private sector LNG cargoes. International LNG suppliers have been pressing on the government to allow imports by private parties and one international energy group talked of a multi-million dollar fund dedicated to LNG imports into Pakistan at its recent launch in Pakistan.

Another international LNG trader has an allocation of certain LNG capacity at 2nd terminal and only needs government permission to start imports of LNG. Ogra has already allowed the use of LNG terminals on basis of mutual agreement between the parties involved. It’s a challenge for the petroleum division and Finance Ministry to execute the model in fastest possible time without over regulating it so that precious foreign exchange is not wasted in idle capacity payment to 2nd terminal company.

LNG is a well-established cheaper fuel option compared to furnace oil and already the existing LNG imports are saving the government over $3 billion in fuel cost. With import of LNG cargoes by private parties, CNG, textile, fertilizer and other industries will benefit from price competition and will receive cheaper rates for LNG imports. Pakistan profile as an LNG importer will further improve paving way for higher LNG shipments at better competitive prices and setting up new terminals.

The global LNG market has been growing at over 12% for the last few years and is now over 300 million tonnes. Natural gas meets nearly 25% of global energy needs and out of this, 10% is LNG and the rest is met through indigenous production and pipelines. Pakistan faces an acute shortfall of gas and has imported 10 million tonnes of LNG which meets only a fraction of the shortfall and is poised to be a 30 million tonnes market in the coming years.

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