Govt to install four more LNG terminals to import gas

ISLAMABAD: Following the approval of $16 billion LNG deal with Qatar at reduced price of 13.37 percent of the Brent by the Economic Coordination Committee (ECC), the government has carved out a plan to install five LNG terminals by December 2017 with the capacity to import 2.9 billion cubic feet LNG per day with the objective to cope with the crisis owing to which Pakistan’s economy has been sustaining 1.5-2 percent loss to the GDP every year for almost one decade.

All the terminals will be set up with leased floating storage re-gasification unit (FSRU) having levelised tariff tolling model. Once all the five LNG terminals come on stream, then Pakistan will be in a position to import enough LNG to meet the current deficit of gas that stands at 2 billion cubic feet per day.

This will not only help bring down the power tariff in the country but would also reduce to bring down the cost of doing business that will give an impetus to the economic activities in the country.

Out of the proposed five LNG terminals, one LNG terminal by Engro at Port Qasim having capacity to import 600 mmcfd LNG with tolling fee of $0.66 per MMBTU has already been set up, which is operational since March 26, 2015. Apart from that, four LNG terminals would also be installed out of which three LNG terminals will be set up each with the capacity to import 600 mmcfd LNG and the last one will be established with the capacity to import 500mmcfd LNG.

The Government Holding Pubic Limited (GHPL) will establish two terminals each having capacity to import 600 mmcfd LNG at Port Qasim most probably in the LNG zone and the said LNG terminal is scheduled to be completed by December, 2016. GHPL will also install the terminal of the same capacity by converting SSGC LPG terminal into LNG terminal which is to be completed by March 2017.

The fourth terminal of 600 mmcfd LNG will be installed by Bahria Foundation, Poly Technologies, Pak-Arab Refinery Company and GHPL at Somiani near Karachi. And the said terminal will be completed in December 2016 by the joint Ventour of four companies. And the fifth one terminal will be set up at Gwadar with capacity to import 500 mmcfd LNG by Inter State Gas System and China Petroleum Pipeline Bureau. The terminal at Gwadar will be completed by December 2017.

There is no denying the fact that the government is doing tremendous job, but there are some grey areas which are needed to be addressed on war footing basis. For instance, PSO, Sui Southern and Sui Northern want to make maximum monetary benefits out of LNG transactions and in case they succeeded, the purpose of importing LNG deal will die down.

Pakistan State Oil (PSO) wants 4 percent margin and likewise Sui Southern and Sui Northern also want to have administrative and operational charges on LNG transactions and if the cost of margins and operational charges and UFG is included then the cost of LNG consumers in the country will swell by close to $3 per barrel. Earlier, Ogra had slashed down the PSO’s LNG margin from 4 percent to 1.8 percent out of which 1.3 percent will go to the FBR and the remaining 0.5 percent will be the margin of PSO. Ogra had also erased the administrative and operational charges of both the gas companies arguing they are using the old infrastructure and there is no new pipeline that was laid down by the gas companies. However, the said three stakeholders moved the Ogra against the decision and submitted their petitions asking for restoration of the margins. CNG, fertilisers and textile sectors are firmly opposed to the margins and even they want the zero role of PSO in importing LNG, saying the private sector should be allowed to import LNG. 

And on top of that the volume of unaccounted for gas in both the gas utilities (Sui Southern and Sui Northern) have gone up to 15 percent, which means that Pakistan’ system is losing the huge quantum of gas of about 400 million cubic feet gas per day and the same volume of LNG the government is going to import from Qatar. The gas theft should be addressed at any cost. If Pakistan’s government succeeds to address the issue of gas theft, then there will be a sizeable availability of gas in the country. But unscrupulous elements who are also influential with the connivance of top officials of both the gas companies are stealing the gas for many decades inflicting huge loss to the national exchequer. 

The World Bank wants to give loan to both the gas companies to reduce the UFG, but the companies are not willing to utilise the loan. In 2006-07, the UFG stood at 6 percent which has now swelled to 15 percent and it is an alarming development. 

And third grey area is that there is a growing impression that the process of awarding the contract from RFP (request for proposal) to bidding phase is designed in such a way that government’s favourite company wins the contract. This impression should be done away with to avoid any controversy and allure maximum companies to make LNG terminals.