Oil, Gas and Refinery Projects update

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Sources in the oil sector said presently the country was holding sufficient stocks of diesel and petrol​

By Tanveer Malik
March 30, 2022

KARACHI: In a preemptive move to ensure fuels availability amid volatile world crude market, authorities plan to push refineries to maximise output, which officials said wouldn’t be possible for the cash-strapped industry, The News learnt on Tuesday.

Petroleum Division, Ministry of Energy, will convene a meeting with five local refineries on Thursday, March 31, 2022 in Islamabad to discuss the same, sources said.

A top executive of a local refinery told The News that on the face of it the purpose of the huddle was to convince local refineries to boost up their production.

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However, he said, refineries, currently grappling with cash flow challenges, were not in a position to increase output.

The official said reportedly the government was also mulling changing duty structure on import of crude oil and high-speed diesel (HSD), which, according to him did not seem possible given the situation.

Sources in the oil sector said presently the country was holding sufficient stocks of diesel and petrol.

Pakistan currently had 23 days’ worth of petrol stocks (590,000 tonnes), while diesel (560,000 tonnes) was sufficient for 26 days.

Sources said Pakistan State Oil’s (PSO) two diesel cargoes for April were on their way. Sources said presently there was no threat of diesel shortage in the country. The government only wants to preempt any shortage because there are fears of diesel shortage in the global market, the added.

Pakistan oil sector is presently receiving price differential claim (PDC) from the government to keep the domestic prices frozen till next budget.

As per sources, during the next two weeks, the PDCs of oil marketing companies and refineries are estimated to reach Rs36.07/litre for HSD and Rs19.64/litre for petrol if the government plans to keep the oil prices at the current level.

During the first two weeks of April, the ex-depot price is predicted to reach Rs169.50/litre against Rs149.86/litre in the fortnight starting from March 16 and ending on 30th.

Furthermore, during the next fortnight that starts from April 1, the ex-depot price of HSD is figured to be Rs180.22/litre against Rs144.15/litre during this fortnight.

For the next two weeks, the PDC on LDO (light diesel oil) and kerosene oil is estimated to be Rs28.33/litre and Rs30.78/litre respectively.

The rise in the PDC is attributed to the increasing international oil prices that reached over $120/barrel on March 25, 2022.
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During 2022: Pakistan to import 32.7mn barrels of crude under Saudi Fund Programme​

• Pak-Arab Refinery Company Limited and National Refinery Limited are planning to import 16.89 and 15.81 million barrels, respectively

BR Web Desk | APP
05 Apr, 2022

Pakistan will import around 32.7 million barrels of crude oil under its agreement signed with the Saudi Fund for Development (SFD) on deferred payment during 2022, reported APP.

“Pak-Arab Refinery Company Limited (PARCO) and National Refinery Limited (NRL) are planning to import 16.89 and 15.81 million barrels of oil in the year 2022, respectively,” according to an official document available with state-run APP.

As per the agreement, crude oil worth $100 million per month for one year could be imported on deferred payment.

“The price will be as per existing long-term agreements/contracts between Saudi Aramco, PARCO and NRL,” it added.

“The facility will be available for a 12-month period which may be extended for 1 year upon consent of the parties. Repayment of the withdrawn amounts plus the margin at the rate of 3.8% shall be made in one annual installment in US$.”

Back in February, then Finance Minister Shaukat Tarin informed the upper house that Pakistan will start utilising the Saudi oil facility on deferred payments from March.

The Financing Agreement worth $1.2 billion for import for petroleum products was signed on 29th November 2021 between the Saudi Fund for Development (SFD) and Economic Affairs Division (EAD), Pakistan.

As per the Financing Agreement, the SFD will extend the financing facility up to $100 million per month for one year for the purchase of petroleum products on a deferred payment basis.

Oil imports account for a major chunk of Pakistan’s import bill, and during the first eight months of the fiscal year, Pakistan imported petroleum products worth $12.941 billion as compared to $6.446 billion in the same period last year, an increase of over 101%.

The country’s overall imports increased by 48.6% during the first nine months (July-March) of the current fiscal year and stood at $58.691 billion compared to $39.489 billion during the same period of the corresponding year, revealed Pakistan Bureau of Statistics (PBS) data.

The rise in imports widened the trade deficit by 70.1% during the first nine months (July-March) of the current fiscal year, 2021-22, and reached $35.393 billion compared to $20.802 billion during the same period of 2020-21.

A senior official privy to the petroleum sector developments told APP that the government had given the Exploration and Production companies, operating in Pakistan, a target to produce around 29 million barrels of crude oil during the current fiscal year.

The companies had produced 27 million barrels of oil in 2020-21, he added.
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The Sui Gas Purification Plant, Sui, Balochistan, 1958 (c).

 

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Pakistan to buy expensive LNG again​

Nation accepts lowest bid for LNG cargoes for May

Our Correspondent
April 22, 2022

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ISLAMABAD: The tender awarded to Pakistan LNG Limited (PLL) for the month of May is quite costly for the country mainly owing to supply-chain disruptions in the international market on the back of Russia-Ukraine war.

The firm selected the lowest bid for liquefied natural gas (LNG) cargoes. Out of seven, six contract prices for LNG cargoes were received. The cargoes were sought on an urgent basis after earlier committed cargoes were cancelled.

The lowest contract price for a cargo requested for May 1-2 delivery received at $29.67 per mmbtu from Total Energies Gas and Power. The second bid for the same delivery window was received from Vitol Bahrain at $29.79 per mmbtu.

Pakistan, which has increased its dependence on LNG in recent years, due to depleting indigenous natural gas deposits, issued a separate tender for six deliveries in May and June earlier this month.

Qatar Energy quoted the lowest bid for May 12-13 delivery at $25.15 per mmbtu and for the June 6-7 delivery window at $27.65 per mmbtu.

Total Energies Gas and Power again quoted the lowest bid for May 17-18, May 27-28 and June 16-17 deliveries at $31.77, $26.87 and $29.04 per mmbtu, respectively.

There was no bid for the June 1-2 delivery window so far, industry sources said. The final decision on acceptance or rejection will be taken in a board meeting of PLL.
The CNG association and general industry hoped to resume gas supply which was suspended earlier this month due to shortage.

“The government has taken a bold step and bought the LNG from the International market in this difficult time for reducing gas shortages and ensuring supply to power plants specifically and other consumers,” All Pakistan CNG Association Chairman Ghiyas Paracha stated.

The gas demand rises in the winter season because people in northern areas and Balochistan use gas geysers and heaters to keep themselves and their homes warm.

Published in The Express Tribune, April 22nd, 2022.

 

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Pakistan LNG Limited (PLL) has awarded four spot cargoes of which three are for May 2022 and one spot cargo for June 2022.

According to Managing Director/ CEO PLL, Masood Nabi, to efficiently manage the upcoming payments, it is imperative that funds are made available to PLL in a timely manner to retire these international payments and resultantly free up PLL’s LC lines for subsequent spot cargoes.

Keeping in view the current scenario, PPL’s liquidity requirements for May 2022 and June 2022 will be over Rs 25.678 billion for May and Rs 57 billion for June. The PPL will also recover Rs 5.7 billion against May delivery and Rs 13.1 billion against RLNG delivery in June. The PLL will require Rs 1.426 billion per day in May 2022 and Rs 3.1169 billion per day in June 2022.

Managing Director PPL has requested the federal government to issue instructions to relevant stakeholders (SNGPL, Petroleum Division, Power Division, and Ministry of Finance) to ensure that payments are as per PLL’s requirements and are processed in a timely manner.

This week, PLL received the lowest bids from Total Energies Gas & Power for liquefied natural gas (LNG) cargoes for delivery windows for May in response to an emergency tender floated in the international market. However, out of seven, six contract prices were received for LNG cargoes.

The cargos were sought on an urgent basis after earlier committed cargos were canceled.

The lowest contract price received for a cargo requested for May 1-2 delivery was at $29.67/mmbtu from Total Energies Gas & Power. The second bid for the same delivery window was received from Vitol Bahrain at $29.7920 per mmbtu.

Qatar Energy quoted the lowest bid for May 12-13 delivery at $25.15 per mmbtu and for the June 6-7 delivery window at $27.65 per mmbtu. Total Energies Gas & Power again quoted the lowest bids for the May 17-18, May 27-28 and June 16-17 deliveries at $31.77 per mmbtu, $26.87 per mmbtu and $29.04 per mmbtu.

Copyright Business Recorder, 2022

 

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In Gilgit, work on first Sui Northern Air mix Gas pilot project costing 1.2 billion rupees is in progress.

Executive Engineer Sui Northern Gas Company Muzafar Ali Khan said gas will be provided to four main villages in the city under the project.

Sui Northern Air mix Gas project will help to save forest and fruit bearing trees from cutting and also pave ways for keeping environment clean

 

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Pakistan will produce a Strategic Underground Gas Storage (SUGS) at a cost of Rs. 127 billion.

The bankable feasibility study in this respect will be finalized by June 2022.

The building of underground storage would be an important part of an integrated and uninterrupted gas supply scheme. .

Pakistan’s reliance on imported LNG is increasing day by day, because of depleting natural gas reserves, but in the absence of storage capacity, the country cannot tolerate a small interruption in the supply of imported gas. Thus, it is being proposed to develop local Strategic Underground Gas Storage with an investment of about Rs 127 billion, as per the official.

The construction of SUGS is part of the government’s policy to improve energy security and affordability in the country,” said a senior official from petroleum sector development.

He stated that the development of the SUGS was intended to fulfill the country’s growing domestic and commercial needs, particularly during the peak winter months of November, December, January, and February.

 

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Daewoo Gas signs contract with Chinese company in offshore LNG terminal​

April 25, 2022



Daewoo Gas has signed a Master Engineering Procurement Construction and Finance (EPCF) contract with China National Chemical Engineering Construction Company (CNCEC) under which CNCEC would design, construct and finance an offshore LNG terminal.

The terminal would be complete with topside equipment to enable LNG filling into ISO containers for use in Pakistan. The specialized LNG containers will be moved by trucks all over Pakistan where LNG will be re-gasified at client sites.

According to a statement from Daewoo, “At its peak, Daewoo Gas’ terminal will handle 10,000 metric tons of LNG per day, improve Pakistan’s energy supply, create thousands of jobs nationally, and reduce carbon emissions.” The total foreign investment in this project including the terminal, facilities, LNG logistics and supply infrastructure is estimated to be US $300 Million.

Shahid Karim, chief executive officer of Daewoo Gas, remarked: “We plan on operationalizing the terminal within a year, before summer 2023, at Pakistan’s LNG zone in the Arabian Sea.”

Daewoo Gas also plans to use the LNG in its own long-distance bus and truck fleet operated by Daewoo Express as a substitute for more expensive and polluting diesel.

CNCEC Chairman Hu Liufang states: “We welcome the award of this significant contract by Daewoo Gas and look forward to designing and constructing world largest VLNG terminal for offshore installation. This large and ambitious project represents the ideals of CPEC industrial cooperation and technology transfer between the brotherly countries of China and Pakistan.”

Sameer Chishty, chairman of Asiapak Investments, which is the holding company for Daewoo Gas, was present at the signing ceremony and commented, “AsiaPak Investments is committed to innovative technology projects in Pakistan’s energy sector, a country with a significant energy need for industry and households.

Through this VLNG project, AsiaPak Investments contributes to further strengthening Pakistan and China’s Iron Brotherhood. We are grateful to all the stakeholders especially OGRA, Port Regulators and Government of Pakistan for their encouragement and support, ensuring uninterrupted supply of affordable energy to the people of Pakistan.”

 

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The consumption of petroleum products continue unabated as the petroleum product prices remain frozen.

After 23 percent in March 2022, the petroleum products sold by the oil marketing companies in April 2022 were up by 25 percent year-on-year. The growth was largely led by furnace oil that increased by over two times in April 2022 versus April 2021, while motor gasoline and high-speed diesel also witnessed double digit growth of 10 and 13percent year-on-year, respectively.

The month-on-month growth of petroleum products’ consumption was also over 15 percent but was however slightly impacted by the Holy month of Ramzan as sales of motor gasoline dropped by 4.4 percent. However, HSD and FO remained robust due to increased agricultural activity and demand from the power sector, respectively. This also allegedly resulted in fuel shortages.

Overall, in 10MFY22, petroleum sales of the three key products were seen growing by over 16 percent year-on-year with double digit growth all the three products. This was a led by FO sales increasing by 25 percent, followed by HSD and motor spirit with growth of 18 percent, and 10 percent, respectively.

Continued rise in sales as well as rising international oil prices has put the country in a tight spot as the new government is still to unfreeze and increase petroleum prices. The unpopulous decision is much more crucial with every passing day and the burden the government will bear will continue to mount as the consumption will continue to go up in the coming months and there is no mechanism in place to curtail or squeeze demand. Higher furnace oil consumption cannot be ruled out as the country enters summers and demand from power sector will definitely rely on furnace oil because of the defaults on RLNG commitments earlier. Whereas diesel and petrol demand will also continue to rise as a relatively slower month of Ramzan is over.

 

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Pakistan Plans to Sign a Long-Term LNG Deal to Ease Gas Shortage​

• Government will float tender for a 10 to 15 year contract
• Fuel crunch is forcing Pakistan to resort to planned blackouts

Pakistan’s government has resorted to planned blackouts to conserve its dwindling supply of fuel.
Photographer: Asim Hafeez/Bloomberg
By
Faseeh Mangi
June 1, 2022, 1:30 PM GMT+5

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Pakistan aims to sign a long-term liquefied natural gas purchase deal in a bid to secure future supply and ease crippling blackouts.

The South Asian nation intends to float a tender to purchase one LNG cargo per month for 10 to 15 years, said Shahid Khaqan Abbasi who is overseeing the energy sector for Prime Minister Shehbaz Sharif. The government is still deciding the timeline for when to issue the tender, which they will use to gauge the market response and pricing, Abbasi said in an interview.

Sharif’s government will also speak with LNG suppliers in the Middle East, including Qatar, the UAE, Saudi Arabia and Oman, for a long-term contract, according to Abbasi. Pakistan last week said it’s not ruling out a potential gas supply agreement with Russia.

Pakistan depends on overseas LNG for power generation, and was hit particularly hard by the surge in spot prices and supply disruptions. The cash-strapped government resorted to planned blackouts to conserve its dwindling supply of fuel.

Asian LNG spot prices are trading at a seasonal high after Russia’s invasion of Ukraine exacerbated an already tight market. Pakistan was forced to purchase several expensive LNG shipments from the spot market to keep the lights on last month. Long-term deals are much cheaper than current spot rates, and may provide some relief for Pakistan’s government.

Abbasi, who is a former prime minister and energy minister, signed several long-term LNG supply deals with Qatar, Eni SpA and Gunvor Group in 2016 and 2017.

However, Eni and Gunvor have canceled several scheduled cargoes to Pakistan in the last year, exacerbating the nation’s energy shortage and fueling political instability. The suppliers backed out by paying a 30% penalty on the cost of the shipment, which is envisaged in the contracts if they cannot deliver.

The government will keep the 30% clause in future deals, said Abbasi, who explained that it is standard in contracts.

Pakistan is also open to signing a 30-year contract to make sure it has enough fuel to power its economy well into the future, said Abbasi. Today, the industry’s longest deals rarely top 20 years.

Pakistan Plans to Sign a Long-Term LNG Deal to Ease Gas Shortage

Pakistan aims to sign a long-term liquefied natural gas purchase deal in a bid to secure future supply and ease crippling blackouts.

www.bloomberg.com

https://twitter.com/x/status/1531936114592083968

 

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ISLAMABAD: Pakistan on Friday imposed a 10 per cent regulatory duty on the import of petroleum products from China after a massive 673pc surge in duty-free imports to Rs250 billion this year with a revenue loss of Rs25bn under the garb of the China-Pakistan Free Trade Agreement (CPFTA).

A decision to this effect was taken at a meeting of the Economic Coordination Committee (ECC) of the Cabinet which also approved almost Rs147bn worth of supplementary grants including Rs81bn additional funds to defense services for expenditure before June 30.

 

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Russia Pakistan oil trade has been a topic of discussion for months in Pakistan. Its also a matter of interest for public, because of massive hike in fuel prices in Pakistan. Ex PM Khan claimed that he wanted to buy Russian oil on cheap prices to provide relief to the public, but there was no official statement from Russian authorities until now .

The Consul General of the Russian Federation Mr. Andrey Fedorov has confirmed that oil trade was discussed during the visit of the former Prime Minister Imran Khan to Russia.

He was Speaking at a press conference at the Russian Consulate, where he said if Pakistan government contacts us, we are ready to provide oil on cheap rates.

He said, "Russia is interested in supplying oil on cheap prices to other friendly countries including Pakistan." He added that, this is just an excuse that Pakistan does not have refineries to treat Russian crude oil.

Everything is being confirmed now. Then what was the problem? The only problem was ‘absolutely not’. Woh kon tha who doesn’t like ‘absolutely not’...

 

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Completion of Mahmood Kot-Faisalabad-Machike (MFM) Pipeline Phase II Reconstruction and Expansion Project,
Oil & gas sector.
It will provide petroleum products supply, contributing to economic development of Pakistan.

 

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MARKETS

Power crisis: Pakistan's request for LNG fails, not a single offer received​

• PLL had invited bids for 10 LNG cargoes from international suppliers during the July-August-September window

BR Web Desk
07 Jul, 2022

 

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Law Division finds Hubco undertaking inadequate​

Undertaking has been sought to establish financial strength of Eni asset buyers

Zafar Bhutta
July 22, 2022

PHOTO: HUBCO

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ISLAMABAD: The Law Division has found the undertaking, submitted by Hubco in relation to transfer of Eni Pakistan’s assets to a new company, inadequate for future commercial operations and has called for seeking original undertaking.

In order to establish the financial strength of sponsors of Prime International Oil and Gas Company Limited (PIOGCL), the Petroleum Division asked Eni Pakistan to provide an undertaking of Hubco, saying if PIOGCL fell short of meeting financial obligations to running the operations in future, Hubco would provide such financial support.

PIOGCL is a consortium of Hub Power Holding Limited (HPHL) and Eni Employees Buyout (EBO) Group.

Transfer of Eni’s shares to PIOGCL had been delayed due to questions raised over financial health of the new entity. A deal between Eni and PIOGCL matured at $16.4 million.
Eni entered into a sale-purchase agreement with PIOGCL on March 8, 2021 for sale of its entire share capital.


Hubco stated that they could provide support for PIOGCL including the EBO’s share with regard to the acquisition price, however, it did not provide an undertaking for future operations as, according to the company, giving such an open-ended undertaking was against the Companies Act 2017.

Following that, the Petroleum Division sought advice of the
Law Division.

“The referring division (Petroleum Division) is advised that the undertaking provided by Hubco (HPHL) is not adequate in respect of covering the future operation of petroleum exploration licences, development and production leases, etc, decommissioning cost to be incurred upon the expiry of licences and leases,” the Law Division said, adding that in case the undertaking was issued in favour of the government, the government should keep the original undertaking in its record.

In response to a letter sent by the Petroleum Division, the Law Division said “it is a norm in petroleum exploration and production business that companies holding petroleum rights dispose of their shares pursuant to their business planning, etc.”

Also, “the respective petroleum exploration and production rules do not provide for a mandatory lock-in period for holding interest in the companies for a certain time period”.

The Law Division said “it is in the interest of the government that if no viable option is available with the buyer, the shareholders must undertake to fund the shortfall. The government would have the option to enforce the undertaking against HPHL, if HPHL fails to meet the funding shortfall of the buyer.”

Published in The Express Tribune, July 22nd, 2022.