Pakistan's Energy Options: Domestic Shale Gas & Iran-Pakistan Gas Pipeline

[RiazHaq]

I agree that fuel costs with those sources will be lower, but your conclusion about these lower costs rendering the problems moot does not necessarily follow. Given historically large transmission/line losses, frank theft, poor infrastructure maintenance, financial corruption and poor management, it is safe to assume that energy problems will continue.

If the fuel costs are one-fifth and revenue is one-half, it's a much better equation that the situation today.

Of course, there should also be more focus on collecting from thieves and deadbeats to minimize govt subsidies which run into hundreds of billions of rupees a year now.

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[VCheng]

If the fuel costs are one-fifth and revenue is one-half, it's a much better equation that the situation today.

Of course, there should also be more focus on collecting from thieves and deadbeats to minimize govt subsidies which run into hundreds of billions of rupees a year now.

.................

Better, yes. Resolved? No.

Sorry, but I just don't see the energy issues being resolved, but only mitigated in the typical stop-gap, half-hearted, ad-hoc, herky-jerky style that has been perfected by now.

 

[Armstrong]

Some interesting propositions and insights by Samar Mubarakmand :

 

[RiazHaq]

Better, yes. Resolved? No.

Sorry, but I just don't see the energy issues being resolved, but only mitigated in the typical stop-gap, half-hearted, ad-hoc, herky-jerky style that has been perfected by now.

Domestic shale gas at $2 per mmBTU can do wonders for Pakistan.

Current gas consumption is 1.3 trillion cubic feet per year. Even if it doubles to 2.6 TCF, it'll still last for the next 25 years to provide cheap abundant energy with electricity at a fraction of the current cost.

Cheap abundant coal will make it even better. Wind, hydel and solar are bonus on top of it.
Pakistan has plenty of these sources.

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[VCheng]

.................
Pakistan has plenty of these sources. ...................

...... but not the skills nor the resources necessary to exploit them in a meaningful way.

 

[RiazHaq]

...... but not the skills nor the resources necessary to exploit them in a meaningful way.

I disagree.

All of the development and infrastructure supplying 1.3 TCF gas has been accomplished by Pakistanis....very few other developing countries have anything comparable.

India is way behind Pakistan in terms of its gas pipeline network, with Pakistan’s network stretching around 56,400 km against its 10,500 km, connecting only 20 cities compared to Pakistan’s 1,050, industry body Assocham said.

Pakistan’s pipeline density, at present is 1044 km/mmscmd (million metric standard cubic meter per day) per day compared to 116 km/mmscmd of India, Assocham said in its paper on gas sector "A Comparison between India and Pakistan".

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And Pak national grid capable of generating and distributing 23,000 MW of electricity is no joke either. Do you know that a lot of countries, including India, don't even have a national grid?

While India currently does not have a unified national power grid, the country plans to link the India's state electricity boards (SEB) grids eventually, and has set up a state company, Powergrid, to oversee the unification. India also plans to establish national and state level regulatory bodies to set tariffs and promote competition.

http://www.geni.org/globalenergy/library/national_energy_grid/india/index.shtml

The skills and the experience are there. Pakistan needs to build on it to do better.

 

[Nishan_101]

I think the best thing now is that we should utilize our own coal for gas production in Sindh and in Punjab....

 

[Thəorətic Muslim]

The potential Pakistan has even with the lack of basic infrastructures.

Shale Gas is just Natural Gas that is under Shale rock. Its very hard to get access to and is heavily technologically advanced.

Although I would suggest that Pakistan get into the Wind and Solar business, as Shale Gas is only a temporary fix.; it will run out in time.

The Sui fields are declining because of the lack of technology in the extraction. Pakistan can not become the new Russia, just making new fields and not investing in new technology.

 

[niaz]

Domestic shale gas at $2 per mmBTU can do wonders for Pakistan.

Current gas consumption is 1.3 trillion cubic feet per year. Even if it doubles to 2.6 TCF, it'll still last for the next 25 years to provide cheap abundant energy with electricity at a fraction of the current cost.

Cheap abundant coal will make it even better. Wind, hydel and solar are bonus on top of it.

Pakistan has plenty of these sources.

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Hon Sir,

Many thanks for the link to the data. I quote the following from the US Energy Administration report that your good self quoted.


"The estimates of technically recoverable shale gas resources for the 32 countries outside of the United States represents a moderately conservative ‘risked’ resource for the basins reviewed. These estimates are uncertain given the relatively sparse data that currently exist and the approach the consultant has employed would likely result in a higher estimate once better information is available. The methodology is outlined below and described in more detail within the attached report, and is not directly comparable to more detailed resource assessments that result in a probabilistic range of the technically recoverable resource. At the current time, there are efforts underway to develop more detailed shale gas resource assessments by the countries themselves, with many of these assessments being assisted by a number of U.S. federal agencies under the auspices of the Global Shale Gas Initiative (GSGI) which was launched in April 2010."


Additionally a very important factor is the cost. You have stated that domestic Shale gas will cost $2- per million BTU. This is what the gas futures at the Nymex are trading at.

For reference Iran asked $12 per mm BTU for piped gas. Largest Middle East LNG producer Qatar want about 15% of the Dubai price for each million BTU. At $100 per barrel oil it comes to about $15 per mm BTU FOB.

From a new buyer such as Pakistan Qataris asked $18 per mm BTU. For the benefit of an ignorant man such as myself, I would be honoured if you could explain how this figure of $2 per mm BTU from domestic Shale gas was arrived at?

My point is that Pakistan as a country cannot and must not base her energy strategy; vital for industrial growth; on the data from a single source which the author admits is more or less guesswork. Also we need a very close look at the economics when the costs are being compared.

(1 barrel of oil roughly equates to 5.55-million BTU)

 

[VCheng]

................ I would be honoured if you could explain how this figure of $2 per mm BTU from domestic Shale gas was arrived at?................

I would like to see that methodology for deriving that estimate too, if you please.

 

[RiazHaq]

Hon Sir,

Many thanks for the link to the data. I quote the following from the US Energy Administration report that your good self quoted.


"The estimates of technically recoverable shale gas resources for the 32 countries outside of the United States represents a moderately conservative ‘risked’ resource for the basins reviewed. These estimates are uncertain given the relatively sparse data that currently exist and the approach the consultant has employed would likely result in a higher estimate once better information is available. The methodology is outlined below and described in more detail within the attached report, and is not directly comparable to more detailed resource assessments that result in a probabilistic range of the technically recoverable resource. At the current time, there are efforts underway to develop more detailed shale gas resource assessments by the countries themselves, with many of these assessments being assisted by a number of U.S. federal agencies under the auspices of the Global Shale Gas Initiative (GSGI) which was launched in April 2010."


Additionally a very important factor is the cost. You have stated that domestic Shale gas will cost $2- per million BTU. This is what the gas futures at the Nymex are trading at.

For reference Iran asked $12 per mm BTU for piped gas. Largest Middle East LNG producer Qatar want about 15% of the Dubai price for each million BTU. At $100 per barrel oil it comes to about $15 per mm BTU FOB.

From a new buyer such as Pakistan Qataris asked $18 per mm BTU. For the benefit of an ignorant man such as myself, I would be honoured if you could explain how this figure of $2 per mm BTU from domestic Shale gas was arrived at?

My point is that Pakistan as a country cannot and must not base her energy strategy; vital for industrial growth; on the data from a single source which the author admits is more or less guesswork. Also we need a very close look at the economics when the costs are being compared.

(1 barrel of oil roughly equates to 5.55-million BTU)

Every estimate of mineral reserves has a degree of uncertainty. If you go back and look at the estimates in the US, you'd find similar risk statements. But it turned out that US has a lot more shale gas than originally estimated.

As to the $2 per mmBTU, it's a figure I quoted because that's the current rate in the US....it shows how the price has dropped over the last several years as production has increased. I expect the same in Pakistan as other basins like DI Khan are explored.

Even if it costs 2 to 3 times as much in Pak, it's still a much better deal than $12 per mmBTU which is linked to the price of oil(currently $20 per mmBTU) and is almost certain to go up with oil prices. I think IP pipeline is a bad deal.

And the price for Iranian gas has to be paid in US dollars which would worsen Pak trade deficit and could even trigger a BOP crisis sending Pak back to the IMF.

Pakistan's current gas consumption is 1.3 trillion cubic feet a year. Even if it doubles, 51 TCF would last a couple a decades. During this period, Pakistan can ramp up more renewables as well as coal gasification.

 

[VCheng]

..........
As to the $2 per mmBTU, it's a figure I quoted because that's the current rate in the US....it shows how the price has dropped over the last several years as production has increased. I expect the same in Pakistan as other basins like DI Khan are explored..........................

So in addition to exploration, you also assumed that the domestic sales market is open to competition, and funding of the whole shebang was done in local currency, to hope that Pakistani prices will match US market prices?

Not very realistic, even with a 2 to 3 times multiplier.

I would submit that the costs for Pakistan for any of the energy sources you describe will remain in the $10-20 mmBTU range.

 

[RiazHaq]

So in addition to exploration, you also assumed that the domestic sales market is open to competition, and funding of the whole shebang was done in local currency, to hope that Pakistani prices will match US market prices?

Not very realistic, even with a 2 to 3 times multiplier.

I would submit that the costs for Pakistan for any of the energy sources you describe will remain in the $10-20 mmBTU range.

What's the basis of your claim?

Experience shows that with local production, the price as well as foreign exchange component of almost everything, particularly commodities, is almost always much lower than imports.

 

[VCheng]

What's the basis of your claim?

Experience shows that with local production, the price as well as foreign exchange component of almost everything, particularly commodities, is almost always much lower than imports.

I am basing my estimates on the basis of international energy cartels ensuring that the current pricing for Pakistan energy sources remains high enough to ensure their profitability given their collaboration with the political structures in place within the country.

 

[Hyde]

@Vcheng

I hardly agree with RiazHaq on his economic anaylsis and exeggarated figures he mentions in most of his articles but one thing has really surprised me to witness the price drop of Natural gas from about 14 dollars to only $1.90 dollars right now.... I remember I used to trade natural gas at 5-6 dollars and used to consider it very safe.... now the down trend is not coming to an end and shockingly reached 1.901 dollars a little while ago. (I am a trader of commodities so know little bit about the prices).

The figures he mentioned could be incorrect as I have no knowledge about shale gas or natural gas or whatever you are discussing with him but if US can afford natural gas for such a low price.... why not Pakistan in future ?