Pakistan nears gas deal with Qatar to power electricity needs

[Dubious]

By Farhan Bokhari in Islamabad and Victor Mallet in New Delhi

Electricity-starved Pakistan is close to signing a deal with Qatar worth as much as $2.5bn a year for the supply of liquefied natural gas (LNG) from the Gulf emirate to fuel Pakistan’s power grid, according to senior officials in Islamabad.

“This will be the last winter of discontent,” said Shahid Khaqan Abbassi, Pakistan’s petroleum minister, in a reference to the long power cuts that have for years angered Pakistani industrialists and householders. He promised a “major improvement” in gas supplies next year after particular severe shortages this winter.

Mr Abbassi is close to signing an agreement for the import of LNG from early 2015. Although the government has yet to name a supplier formally, Mr Abbassi and other officials from his ministry said that Qatar was the expected seller.

“If we can provide gas to those of our power generation plants that run on gas, [electricity cuts] will go down by half,” said Mr Abbassi. Demand for natural gas in Pakistan, a country of 180m people, is estimated at 8bn cubic feet per day, double the amount produced locally from gas fields in the south of the country.

Pakistan has also negotiated an agreement to buy gas to be piped from neighbouring Iran, but implementation of the project has been has been hampered by lack of financing and by US opposition.

Mr Abbassi expects Pakistan to buy some 3.5m tonnes of LNG a year from Qatar, meeting only part of the country’s shortfall.

Before the winter, Mr Abbassi alarmed his cabinet colleagues when he told them that for the first time in Pakistan’s history gas supply this year would not be sufficient to meet the needs of domestic consumers – even if supplies to commercial and industrial buyers were suspended.

Nawaz Sharif, prime minister, ordered Mr Abbassi to “take emergency steps” to tackle the situation, according to a senior official working with Mr Sharif. “Failure to provide gas will only enlarge the political risk [to the government],” the official said.

Growing energy shortages in recent years have prompted street demonstrations that only add to political instability in Pakistan.

Some critics have questioned Pakistan’s ability to keep up with the payments for future LNG supplies given the country’s weak finances, although the gas would partly replace oil used for power generation. “That may spare foreign exchange and allow the authorities to pay for at least part of the gas imports,” said Sakib Sherani, a former finance ministry adviser

The discussions with Qatar have deepened uncertainty over an earlier plan by Pakistan to build a pipeline to the Iranian border to import gas from Iran’s South Pars gas field. Mr Abbassi refused to comment on that project, and said only that “Pakistan will need more gas even after the LNG project. We are looking at all possible avenues.”

Pakistan nears gas deal with Qatar to power electricity needs - FT.com

Whats with all the dilemma? 1 min they announce 1 country next min the next country before we know it we will have Middle east in Pakistan?!

 

[Kompromat]

Its a good development. We need to diversify our gas supply.

 

[NoPartition]

No pakistan need SOLAR POWER, the world is moving to reusable energy while we go get gas and oil deals

 

[VCheng]

Its a good development. We need to diversify our gas supply.

Diversification of energy sources is good policy, but the basic problem remains: how to pay for the rapidly growing energy needs of an expanding population? Imported energy, no matter what form, is subject to rises and falls in the international markets and its takes a stout economy to deal with those fluctuations, which are inevitable. Pakistan's economy is far from stout and indeed getting weaker, relative to its requirements.

 

[ajpirzada]

Diversification of energy sources is good policy, but the basic problem remains: how to pay for the rapidly growing energy needs of an expanding population? Imported energy, no matter what form, is subject to rises and falls in the international markets and its takes a stout economy to deal with those fluctuations, which are inevitable. Pakistan's economy is far from stout and indeed getting weaker, relative to its requirements.

all what you have said is true but given that we are only producing half of what is required, there is no other option. The only feasible option as of now is to develop coal fields but that will take good five years before anything significant starts pouring in.

at the same time, economy is weak because of the energy shortfalls. If these shortfalls are addressed then there is no reason why the economy should still stay weak.

what are the details of this Qatar project? @Aeronaut ?

Here are some of the relevant details:

Port Qasim to charge LNG firms $1m fee
THE NEWSPAPER'S STAFF REPORTER

- File Photo
Updated 2014-01-08 12:22:59

ISLAMABAD: The Port Qasim Authority (PQA) has decided to charge $1 million (Rs105m) as processing fee to grant no-objection certificate (NOC) to companies to use its terminal for import of liquefied natural gas (LNG).

This was conveyed to a 13-member task force constituted by the government for LNG import and was led by Secretary Petroleum Abid Saeed which held its first meeting here on Tuesday.

The meeting was called to improve consultations between the Port Qasim Authority and Sui Southern Gas Company Limited (SSGCL) for construction of new terminal and utilisation of existing capacity of the port.

The meeting was informed that the PQA had previously issued NOC to a number of LNG import contenders on the persuasions of the ministry of petroleum and allocated capacity utilisation and even signed implementation agreements with the spirit of facilitation but all of them failed to comply with requirements of the agreements.

“All the previous parties did not take steps to implement their agreements or import LNG,” the PQA is reported to have informed the federal government.

As a result, the PQA had now decided to adopt relatively stringent criterion for capacity allocation and issuance of related NOC. This would mean payment of $1m fee for issuance of NOC followed by signing of implementation agreement.

The meeting was also informed that PQA was unable to ensure dredging of 24-km channel required to allow large ships to move and berth at the port for LNG handling because the dredging machinery was not available to PQA in the short term.

Engro Corporation that has recently been allowed 66 cents per million Brithish thermal unit (mmBtu) as terminal charges, however, assured the task force that it would make its own arrangement for additional dredging.

The company would be responsible for construction of LNG terminal at Port Qasim but the government has not been able to finalise a deal for supply of LNG due to repeated problems arising of non-compliance of transparency and procedural requirements leading to litigations.

Informed sources said the government had also decided to allow United Energy Group of United States that had signed a memorandum of understanding with the previous government to explore possibilities of supplying LNG from the US market at Henry Hub rates that may be cheaper than LNG available in the Middle East besides engaging with the Qatar government for government-to-government deal on LNG supply.

Engro Corporation’s subsidiary Elengy Termimal Pakistan Limited had bid for the fast track LNG import facility advertised by the government of Pakistan through the Interstate Gas Company Limited (ISGS). The project is to lead to import of 400 million cubic feet per day of LNG. Engro already has a chemical handling terminal at Port Qasim.

Port Qasim to charge LNG firms $1m fee - DAWN.COM

SSGC board approves LNG terminal at Port Qasim

Published 2014-01-29 07:25:08
ISLAMABAD: The board of the Sui Southern Gas Company (SSGC) on Tuesday approved, with certain conditions, a plan for construction of new terminal for import of Liquefied Natural Gas (LNG) at Port Qasim to a subsidiary of Engro Corporation.

The final approval for signing of the agreement between the SSGCL and Engro would be accorded by the Economic Coordination Committee (ECC) of the cabinet subject to written consent of the Engro to accept two major conditions set by the SSGCL board.

Informed sources told Dawn that Engro would be responsible for putting its terminal operational within 11 months after the signing of the agreement.

The board cleared the proposed agreement on the condition that the power owner would not claim capacity payments in case of non-materialisation of LNG supply contracts or in case of late shipment of supplies.

Secondly, the SSGCL would not be responsible for gas losses, commonly known as unaccounted for gas (UFG) losses at the terminal during the re-gasification process.

These sources said the SSGCL and the government officials have been in negotiations with the bidder over the two conditions over capacity payment issue and UFG and had been successful in convincing the Engro to accept them in the interest of the project to move forward on a fast track basis.

Engro Corporation has recently been allowed 66 cents per million British thermal unit (mmBtu) as terminal charges but this would come into force through the proposed agreement cleared by the SSGCL board on Tuesday.

Engro would be responsible for construction of LNG terminal at Port Qasim. Early this month it also assured the government to make its own arrangement for additional dredging of the 24-km channel required to enable LNG ships to the new channel.

Engro Corporation’s subsidiary Elengy Terminal Pakistan Limited had bid for the fast track LNG import facility advertised by the Government of Pakistan through the Interstate Gas Company Limited (ISGS).

The project will lead to import of 400 million cubic feet per day of LNG. Engro already has a chemical handling terminal at Port Qasim.

SSGC board approves LNG terminal at Port Qasim - DAWN.COM

 

[ajpirzada]

LNG import to become a reality

February 03, 2014
IQBAL MIRZA
With the formal approval of LNG import agreement between Sui Southern Gas Company (SSGC) and Engro Vopak Terminal Limited (EVTL), by the board of directors of SSGC and expected approval by the Economic Co-ordination Committee (ECC) of the Cabinet, Pakistan is all set to make LNG import a reality, which has been a dream for over seven years now.

According to this agreement, EVTL will set up an LNG handling facility at its existing terminal at Port Qasim and initially import 200 million cubic feet per day (MMCFD) which will be increased to 400 MMCFD at a later stage. Through this agreement Government is expecting to bridge the demand and supply gap of gas in the country and expecting first LNG vessel to arrive in November this year.

Informed sources told Business Recorder that the government has been successful in negotiating a highly discounted tolling fee agreement with Engro Terminal which would be $0.66 per mmbtu, an extremely low price relative to international benchmarks. Sources said that in Indonesia tolling price is $1.8 per mmbtu for handling LNG at a floating terminal and $1.2 per mmbtu for a land terminal. Average tolling price (based on 2010) in North America was $0.73 per mmbtu, $0.87 in China, $0.81 in Europe, $0.89 in South Korea and Japan and $0.72 in the Middle East.

Sources close to the developments said that in the next 10 years, production of natural gas in Pakistan is expected to fall by 30 percent while demand is expected to rise by 70 percent - reaching 8.5 billion cubic feet per day. At the current rate of consumption, it is expected that Pakistan will run out of gas in less than 20 years, hence it's imperative to look for the alternative source of gas in and around Pakistan.

Pakistan's daily production of natural gas is approximately four billion cubic feet, while accumulated demand exceeds six billion cubic feet per day. Petroleum Minister Shahid Khaqan Abbasi is on record saying that the delay in the import of LNG is causing a loss of $ two billion annually to the country.

International demand for LNG has increased and countries like India, Bangladesh, Jamaica, Indonesia are opting for LNG to sustain their energy needs where in Pakistan has been struggling for the same for the last seven years.

In January 2013, PortGas Pakistan Limited, an associated group company and Engro subsidiary - Elengy Terminal Pakistan (ETPL) participated in a bid to set up an LNG import terminal for supply of 400 mmscfd RLNG. The first bid was cancelled due to shortcomings on part of PGPL and Global Energy Infrastructure Pakistan (GEIP); consequently, both the companies submitted their second bid to SSGC in February 2013. The second bid was declared to be non-compliant by the Advisor Ministry of Petroleum and Natural Resources as ETPL had presented Brent based pricing per RFP and HH+Brent based option for the supply of LNG.

This was the third tender which is being run this year with two integrated tenders already cancelled earlier in 2013. The government called for bids for the fast track LNG tender on tolling basis only, to which two domestic parties responded - ETPL and Pakistan PortGas Limited (PGPL).

Sources claimed that there are lobbies in the country, who don't want country's energy issues to be solved, or at least through LNG import due to their larger than life business and economic vested interests. There are business groups, powerful enough to derail the gas import plans in the country be it LNG import or IP gas import arrangement. The current government has shown its resolve and commitment to bridge the current gap and this time, we won't let vested interests to derail the gas import in the country, an official based in Islamabad categorically stated.

They said that government has chosen Engro Terminal for fast track LNG import in the country for the fact that EVTL is the only state-of-the-art integrated bulk liquid terminal in Pakistan with an open access and merchant floating storage re-gasification terminal with a storage capacity of 3.5 million tons per annum (mtpa).

They further said that China Harbour Engineering Co Ltd (CHEC) is associated with ETPL as an EPC contractor only to participate in the Fast Track LNG project. In some circles there is a misunderstanding that China Harbour Engineering Co Ltd (CHEC) was blacklisted by World Bank. This, however, is not true and the objection is not relevant. The company in focus - CHEC - has never been blacklisted by World Bank. In fact one of its sister companies, China Road and Bridge Corporation, was debarred by World Bank for "road and bridge contracts for the duration of January 2009 to January 2017 but not CHEC. In the LNG project, CHEC is associated with ETPL as an EPC contractor only to participate in the Fast Track LNG project at Port Qasim, which is a marine terminal and does not fall in the category of "road and bridge contracts.

Government has done its due diligence on Engro's capacity and capability to import LNG in the country and a quantitative risk assessment was conducted by Lloyd's Register UK, which reviewed hazard identification, navigational simulations and dispersion modelling in 2011. It has not only approved the site in terms of LNG operations and safety, but cites certain operational advantages of it. Moreover, ETPL is committed to comply with all safety regulations in PQA and have agreed to third party vendor assessment, they said.

LNG Import is the fastest short-term solution to Pakistan's crippling economic needs. The IP gas pipeline will take approximately three years to complete after FID which itself is in doldrums. The Hydel expansions (at Mangla/Tarbela) are expected to complete in 2017. Similarly the nuclear expansion project at Kanupp II is to be completed in 2016. This means Pakistan has no solution to the ongoing problem at least for the next four years except for LNG import which could come in as early as end of 2014.

LNG import to become a reality | Business Recorder

things seem to be getting closer. Apparently Govt delegation is going to meet the Qatar govt on the 7th of this month. It is expected that the price of gas will be finalized.

Earlier, during meetings with officials of the previous PPP-led government, Qatar had offered to export LNG at a price equivalent to 14.7% of Brent crude oil rate when it was hovering around $110 per barrel in the international market.

Later, Doha pushed the price down to $17.437 per million British thermal units (mmbtu), a 0.5% discount over the previous rate of $18.002 per mmbtu for the 20-year lifetime of the project.

The price did not cover capital cost of LNG terminal and its charges, import expenses, re-gasification, wastage and shipping costs. The additional costs would add about $2.084 per mmbtu to the quoted price.

Moving closer: Qatar agrees to slash price for LNG export – The Express Tribune

 

[BATMAN]

Its a good development. We need to diversify our gas supply.

Its all corruption.... i do not support producing electricity using gas.
Gas should be only for house hold usage or commercial vehicles.

 

[VCheng]

all what you have said is true but given that we are only producing half of what is required, there is no other option. The only feasible option as of now is to develop coal fields but that will take good five years before anything significant starts pouring in.

at the same time, economy is weak because of the energy shortfalls. If these shortfalls are addressed then there is no reason why the economy should still stay weak. ......................................

These new supplies are important as far as meeting existing shortfalls is concerned. Pakistan's energy demands are going up by about 10% year after year, but we have no long term plans to deal with them except for stopgap knee jerk reactions like this, that are usually years late and never enough to catch up.

So, while you make a good point that the economy should perk up with better energy inputs, the reality will remain playing catch up and therefore there will be no booming economy for years to come. However, there will be smaller shortages if these supplies are realized, so it is an improvement, but shortages of energy will nonetheless persist for the foreseeable future.

 

[ajpirzada]

These new supplies are important as far as meeting existing shortfalls is concerned. Pakistan's energy demands are going up by about 10% year after year, but we have no long term plans to deal with them except for stopgap knee jerk reactions like this, that are usually years late and never enough to catch up.

So, while you make a good point that the economy should perk up with better energy inputs, the reality will remain playing catch up and therefore there will be no booming economy for years to come. However, there will be smaller shortages if these supplies are realized, so it is an improvement, but shortages of energy will nonetheless persist for the foreseeable future.

i cant disagree with you much. you are right about the 'catching up' problem in which we have been caught up