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September 15, 2020

Sponsors reluctant to invest in new LNG terminal

National

September 15, 2020

ISLAMABAD: The actual implementation of the new private LNG terminals is in doldrums as the sponsors have shown their reluctance, saying that they are unable to initiate the work on the projects till the availability of the guaranteed pipeline capacity that is currently not available in the prevalent structure, a senior official privy to the development told The News.

The gas companies Sui Northern and Sui Southern communicated to Petroleum Division that in the existing gas pipeline structure, there is no capacity available at all for the new LNG terminals to transport their imported gas and more importantly, the Petroleum Division had also endorsed their viewpoint. But the federal cabinet allowed the capacity in the existing gas pipeline infrastructure for the new LNG terminals.

The SSGC and SNGPL were of the view that the LNG pipeline-I and pipeline-II are currently enough to cater to the requirements of existing LNG terminals and there was no room for allocating more capacity to new LNG terminals in the existing infrastructure. It is not possible to operate the new LNG terminal without allocating more capacity in the existing infrastructure.

The sponsors also showed cold shoulders and refused to subscribe to the official decision that Petroleum Division will allocate the capacity to them in the existing pipeline on a first come first served basis. They say they require pipeline capacity for Final Investment Decision (FID).

The official said that the shyness of the investors will further accentuate the gas crisis in the country. In the forthcoming winter season from November 1, 2020, a massive gas deficit will hit the consumers and there will be huge gas load shedding. To a question, he said that in the system of SNGPL there will be a loadshedding of 415 million cubic feet per day this time.

It is pertinent to mention that the prime minister, in a national seminar on natural gas held in Islamabad on September 9, 2020, raised the need for setting up more LNG terminals on a fast-track basis in view of the forecast severe gas shortage from the winter of 2021-2022.

Accordingly, the Federal Cabinet, overriding the procedural requirement of a No-Objection Certificate from the Pakistan Navy and the Ministry of Defence, allowed two LNG terminals to go ahead. However, he said, the actual implementation of these two projects is doubtful as the sponsors are asking for pipeline capacity which is currently not available and is not likely to be available for several years.

This will delay the FID and the gas shortage will further accentuate. The sources said that the only project in the country which is shovel-ready and can actually achieve First Gas in the winter of 2021-2022 is the Pakistan GasPort expansion Project.

And the examination of documents available with The News shows that the project has already received the NOC from the Ministry of Defence. And according to the documents, the PQA (Port Qasim Authority) Board in its meeting of Dec. 6, 2017 reiterated that “The Board resolved to re-confirm the request for NOC with the condition that the specific site will be subject to adjustment, after relevant studies about realignment of the channel since the proposed site may be in the remodeling zone.”