Still you have doubt that Noon League was not a band of thieves? They did not put investments in local exploration but went out to do expensive LNG contracts. Obviously not for the country but to make money.
Honorable Air Marshall,
Many of my countrymen have misconceived ideas about how expensive LNG is and how much money was siphoned off to line the pockets of those involved. I have taken the liberty to write a detailed response to your rather cynic remarks. I would request you to graciously read all of it and then decide what is the reality.
To begin with I would like to clarify that I have no political bias whatsoever in favor of PML-N or PTI. I am a Chemical Engineer by profession and worked in the petroleum /energy field during almost all of my professional life. I spent nearly 10 years working for a company that specialized in the blending & supplying Fuel Oil (Furnace oil) to the power plants including Pakistan.
Politically I am with the opinion of a close friend from Islamabad who declared in Punjabi “O chore sun, ay nalaiq nein” meaning those (PML-N) were thieves but these (PTI) are incompetent. My conclusions, right or wrong, are based entirely on my professional opinion on this matter.
Oil/gas exploration in Pakistan.
Oil/gas exploration is a risky business and a long process. First one has to find petroleum companies willing to invest in prospecting the oil/gas in your country. Once the blocks have been awarded, the “Pre-drilling phase” starts. This includes seismological surveys to decide on the most promising location. This process can take a year or more.
Next comes the drilling phase. Depending upon the type & nature of the rock and the target depth, one would expect it to take between 3 & 4 months.
Assuming that the company was lucky (Chances are no more than about 10 to 15%) and the hydrocarbons were discovered, it starts the development phase. This involves the removal of associated impurities such as water and other liquids (condensate), solids and undesirable impurities such as sulfur and its compounds. Transportation facilities such as pipelines or rail lines are also needed to transport the purified crude oil/gas to the consuming centers. Assuming it is an on-shore field the development phase can easily take up to a couple of years. Hence we are talking about a 3 to 4 year period before benefits /results from a successful exploration activity can be enjoyed.
According to the “World Oil” data of 2017, 93 oil/gas wells were drilled in Pakistan in 2016 and another 84 scheduled for 2017. Indicating that within the monetary constraints, oil exploration & field development activities have continued. However, to overcome the immediate shortage of gas, import as LNG is the only viable solution.
LNG as a replacement for Furnace Oil.
The following is from the Tribune.
Quote:
Are there any procedural flaws?
An Engro spokesperson pointed out that in 2013 when the energy crisis worsened, the government, via Inter State Gas Systems (ISGS), issued an open and competitive tender for the setting up of an LNG terminal.
Engro ElengyTerminal Pakistan Limited (EETPL) participated in the single-step, two-envelope bidding process. An independent, professional and international firm – QED – evaluated all the technical bids. Of the two bidders, EETPL won the bid strictly in accordance with the Public Procurement Regulatory Authority (PPRA) Rules 2004, said the spokesperson.
The LNG Services Agreement (LSA) was approved by the Economic Coordination Committee (ECC) and Sui Southern Gas Company (SSGC) board as well as by the cabinet in an auditable and transparent manner.
Economic benefit
The spokesperson said accelerated work allowed Engro to make the LNG terminal operational from March 28, 2015, in only 335 days and within the committed time frame. Since then, the terminal has imported over 8 million tons of LNG, reducing Pakistan’s gas deficit by an estimated 20-25%.
According to the spokesperson, Pakistan has saved approximately $5 billion since the start of the LNG project, replacing the import of more expensive furnace oil with LNG. The project has also revived the fertilizer sector, compressed natural gas (CNG) filling stations and more than 500 industrial units by ensuring consistent gas supply via LNG imports. Parts of Punjab could have potentially shut down if there was no LNG, the spokesperson added.
Capacity charges
Capacity payments are a norm in the energy industry for projects of such nature and are designed for the recovery of investment and operating costs including the lease of FSRU for large and complex projects.
It is also important to note that fixed capacity or ‘take or pay’ mechanism is binding on both the parties ie if Engro fails to deliver gas as per quality or is offline for any reason, it will pay a penalty of $342,000 per day and also lose the capacity fee of $228,000 per day for that particular day.
Such a mechanism is not new for the LNG industry and most LNG re-gasification terminals and liquefaction chains operate on the same take or pay model. IPPs
A similar take or pay model has also been applied in the case of independent power producers under which power generating units of up to 4,200 megawatts have been installed and operated since the mid-1990s.
For a 600MW IPP, the levelised upfront tariff approved by the National Electric Power Regulatory Authority (Nepra) is 1.83 cents per kilowatt-hour (kWh), which means the IPP will receive approximately $242,000 a day as fixed cost of the power plant.
This does not mean that the IPP will make profit of $2 billion over its life of 25 years as it needs to recover hefty capital expenditure and operating costs, insurance, etc through such a mechanism.
Fixed daily charges – called capacity payments in the industry – were part of the contract issued by ISGS and all bidders were provided with an equal opportunity.
Tolling fee comparison
ETPL’s tolling rate is one of the most competitive in the world. Its tolling fee was $0.66 per million British thermal units (mmbtu) when imports were 400 mmcfd, but it has come down to $0.44 following increase in imports to 600 mmcfd.
In Indonesia, Arun LNG charges $2.58 per mmbtu, other terminals in Indonesia receive $1.5-1.8 per mmbtu, China LNG Terminals $1.5-2 per mmbtu, India’s Kochi $1+ per mmbtu, Italy’s Adriatic LNG $1.47 per mmbtu, Italy’s offshore LNG Toscana $1.2 per mmbtu, Korea & Japan LNG terminals $0.8-1 per mmbtu, Lithuania’s Klaipedos Nadta $0.88 per mmbtu and Pakistan’s SSGC retrofit project (scrapped) $0.8 per mmbtu.
Controversy over cost escalation
There has been a controversy that the initial cost of the project was $40 million, which later escalated to $150 million. However, Engro and government officials say $40 million and $150 million were two different projects, which had different technical specifications.
The $150-million project was a totally new and Greenfield project where extensive dredging was undertaken to create a new berth. The $40-million project had been proposed to use the existing operating berth at Engro Vopak Terminal Limited (EVTL) where no dredging or offshore construction work was required. Additionally, under the revised project, a 24-kilometer pipeline network was also laid a new jetty was constructed, which was capital-intensive in nature, the Engro spokesperson said.
Unquote.
https://tribune.com.pk/story/2025286/2-lng-import-terminal-controversy-rumbles/
The following is from the News just before PTI Gov’t took power.
RLNG enables Pakistan to save $2-3 billion on power generation
ISLAMABAD: With the import of LNG, Pakistan has so far benefited by $2-3 billion through replacing furnace oil and diesel with imported gas as fuel for power generation.
At present LNG of 1-1.2 billion cubic feet per day is being injected into Pakistan’s economy which is playing a pivotal role in catering to the various sectors of the economy.
Top sources in the Petroleum Division said that Pakistan LNG Limited under Managing Director Adnan Gilani has been able to put Pakistan on the world LNG map and has developed PLL into a world-class company literally from scratch. PLL has even managed to obtain LNG prices cheaper by 18-20 percent than the cargoes being imported by Pakistan State Oil and rates 25-30 percent cheaper than the other countries which are currently importing LNG.
Under Mr Gilani, PLL has been able to achieve the lowest LNG prices the world over and if this process continues at these or better prices the additional savings will be $300-400 million annually or $3.5-4 billion over the next decade. This is in addition to the annual savings of $2-3 billion annually by displacing oil imports and will further bring down average LNG prices in Pakistan.
Pakistan has so far attracted over $6 billion in developing LNG infrastructure and the same amount will also be invested in laying down 1 more RLNG specific pipeline, one more RLNG power plant at Trimmu and four more LNG terminals. So in all, from establishing LNG terminals to pipeline and powerhouses a massive investment of $8-10 billion will be made in the country through this initiative.
Highlighting the importance of LNG, the official said that Pakistan is currently producing 20 GWs plus electricity on average, and out of which, 7-8 GW electricity can be generated by LNG, and power outages have been reduced from an average of 8-12 hours per day to less than two hours.
On RLNG, the power plants with 62 percent efficiency, electricity is being generated at an average cost of Rs7-8 per unit which is 50 percent less than the cost of electricity being generated on furnace oil which hovers around 12-13 per unit on average.
On RLNG, the power plants with 62 percent efficiency, electricity is being generated at an average cost of Rs7-8 per unit which is 50 percent less than the cost of electricity being generated on furnace oil which hovers around 12-13 per unit on average.
https://www.thenews.com.pk/print/33...istan-to-save-2-3-billion-on-power-generation
It is entirely is up to the readers whether they believe it or not. It is probable that the whole bunch of PML-N politicians were crooks; however, it is my firm belief that the implication of billions of Rupees siphoned off by Shahid Khaqan Abbasi & his cronies in the LNG importation affair is misplaced and his imprisonment is out and out political victimization.
It is also possible that Kaptaan and his PTI stalwarts are ‘Lily-white’ but in my opinion, they are ‘Nincompoops’ as well.
I rest my case.
