Govt pitches ambitious plan to meet gas demand

LAHORE: After wasting three years since coming to power, the government has come up with yet another drawn-out Liquefied Natural Gas (LNG) plan to boost supply and reduce demand-supply imbalance by up to a further three years.

Following its failure to do anything good for addressing supply-side constraints on natural gas availability, the federal Ministry of Energy presented a plan to augment LNG imports, building natural gas storage and constructing south-north pipeline. The inaction by the federal government has resulted in stagnation in natural gas supply in contrast to its high demand and its spillover effect on falling power generation.

As the center acted as a silent spectator for the last three years, the national economy was crippled by one after another power crisis besides squeezing natural gas supplies. Moreover, the cost of natural gas and power generation increased considerably as a result of poor management of primary energy resources, said market insiders.

Experts lamented that the federal government had failed to fully utilise available capacity of existing LNG terminals. Hence, it has to rely on costly furnace oil (FO) and high-speed diesel (HSD) for power generation, further multiplying energy woes for the end-consumers.

The baseload generation with coal, poorly managed RLNG, and local gas was not enough so as an alternative, the government chose FO and HSD for power generation. This was avoidable given the fact that existing terminals have excess idle capacities for import and regasification of LNG, the experts regretted.

Why only 750mmcfd supply of gas to power generation when demand is 1200mmscfd, the market insiders posed a singeing question. It means the center has not ordered enough cargoes plus why does the power division not commit to a threshold volume for FO. That has been a single major factor for the recent twin power and gas crisis, experts claimed.

Explaining the badly utilising primary energy mix, insiders said that excess FO volumes were eagerly demanded by the government and made available by OMCs but in case of LNG they were not willing to meet the demand.

They questioned that if the fuel planning was to ensure the most efficient generation and given our excellent energy mix that allowed us flexibility in choosing fuels for generation, then “why was that not being done?”

They said there would always be a change due to unknown factors including weather conditions, but “we have significant data to be able to project demand”. “There is no perfect science for it, but planning will yield better results than the current approach of blindly following the demand pattern.”

“Unless we learn this, competitive market development would continue to be a dream,” experts argued.

The existing terminals were not being facilitated to bring cargo for the excess capacity they have and sell to the private sector due to reasons better known to energy managers, the industry officials said. “Unfortunately, they are not doing anything tangible to resolve lingering issues.”

The process of setting up of new LNG terminals has been slowed down to a snail’s pace mainly due to what experts called ‘regulatory trap’ despite the fact they could be set up in less than one year.

While presenting a new energy plan, Tabish Gauhar, Special Assistant to Prime Minister on Power and Petroleum, said, 6-12 months were still needed for utilising the excess LNG terminal capacity.

He acknowledged there could potentially be up to 300mmcfd, which equaled to three plus additional LNG cargoes per month of "excess capacity" available at the existing two RLNG terminals that might be utilised on a strictly private-to-private i.e., without any GOP "take or pay" payment obligation and on an open/third party access bases) to further bridge the demand-supply gap, especially in the coming winters for the domestic gas consumers, under a "without prejudice" arrangement sanctioned by OGRA.

Moreover, Gauhar added that on-ground LNG storage infrastructure could be set up at Port Qasim in two years by using available GIDC funds. “Similarly, additional RLNG terminals can be set up in two years plus, while it is hoped these new "merchant" LNG terminal developers shall achieve financial close and start construction this year.``

Regarding North South Gas Pipeline, he said, “Need to make substantive headway with the Russian consortium in the next couple of months on this additional Karachi to Lahore gas pipeline which is of critical importance to the country's energy security”. However, Gauhar said, it could be completed in medium term involving 2-plus years.

Commenting on the new timeline of natural gas projects, market insiders said the unending energy crisis was unlikely to subside even after the completion of the incumbent government’s tenure.

When contacted, spokesman, Ministry of Energy, did not comment on low usage of cheap LNG for power generation despite availability of greater import capacity.