Shahid Khaqan Abbasi - Much has been recently written and said about Pakistan’s procurement of liquefied natural gas (LNG) to meet its energy needs. Despite our best efforts to disseminate the facts through the print and electronic media, and parliamentary forums, several so-called energy experts and pseudo-intellectuals continue to raise unsubstantiated and irrational questions about the contribution of LNG to the future of Pakistan’s economy. Any doubts about LNG need to be laid to rest, and the people of Pakistan need to judge for themselves whether or not LNG is beneficial for Pakistan.
LNG is a game-changer and the only solution to Pakistan’s current energy shortages; the viability of Pakistan’s energy future in the short to medium term is directly linked to LNG. If Pakistan had committed to LNG 10 years back, we would not have any power or energy crisis today.
I have no hesitation in placing the Facts about LNG on public record.
Fact 1: More than 50% of Pakistan’s current total energy mix - including hydel, fossil fuel, nuclear, and renewables - is based on natural gas. Pakistan’s natural gas production has been stagnant at the 4,000 million cubic feet per day (MMCFD) level for over 10 years; new gas discoveries have barely kept pace with the natural depletion of existing gas fields.
Fact 2: Pakistan’s constrained demand for natural gas is 6,000MMCFD against a supply of 4,000MMCFD; the unconstrained demand for gas is estimated to be 8,000 MMCFD or more than double the current domestic production.
Fact 3: Pakistan, in addition to mobilizing resources for increased domestic gas production, needs to import natural gas - either through transnational pipelines or LNG. Complex issues always have complicated solutions; with due respect to our so-called energy experts, noble causes such as biogas are not a viable solution to Pakistan’s vast energy needs.
Fact 4: The two transnational gas pipelines that Pakistan has pursued for over two decades have been delayed due to reasons beyond our control. The 750 MMCFD Iran-Pakistan (IP) gas pipeline has been delayed due to international sanctions; although there is now hope for removal of the sanctions and we will be going ahead with the construction of the IP pipeline; the first gas from the IP pipeline is at least 30 months in the future. The 1,325 MMCFD Turkmenistan-Afghanistan-Pakistan-India (TAPI) gas pipeline has been delayed due to the security situation in Afghanistan and structural issues with the project transaction; the first gas flow from the TAPI pipeline will take more than 48 months.
Fact 5: LNG import remains the only solution to Pakistan’s gas and energy needs in the near future; the last 3 governments following an integrated approach, where the LNG regasification terminal developer was also the LNG supplier, failed in 5 separate attempts in 10 years to import LNG into Pakistan.
Fact 6: The PML (N) government using an unbundled approach, where the LNG regasification terminal was separated from LNG procurement, has succeeded in providing Pakistan’s with its first imported gases through LNG within the first 20 months of its tenure.
Fact 7: Pakistan’s private sector has built the world’s fastest LNG regasification terminal in a period of less than 11 months ; the contract was signed after a completely transparent PPRA-compliant bid process on April 30, 2014, and the first LNG based gas flowed into the system on March 26, 2015.
Fact 8: The fast track LNG regasification terminal at Port Qasim was built in record time by Engro Elengy Terminals Limited (EETL), a 100% Pakistani company, without any public funds and without a sovereign guarantee on a tolling fee based BOOT model.
SSGC has committed to regasification of 400 MMCFD or 3 Million Tonnes per Annum (MTPA) of LNG through this terminal; the contracted LNG regasification tolling fee of $0.66/MMBTU is one of the lowest in the world, especially for Floating Regasification and Storage Unit (FSRU) based terminals.
Fact 9 - The negotiations under a PPRA-compliant government-to-government process for a long-term LNG supply contract between Pakistan State Oil (PSO) and Qatar Gas are in the final stages. Despite unsubstantiated and biased speculation to the contrary, the LNG price and several other terms affecting the LNG price are still under negotiation with Qatar Gas. The terms and flexibility in long- term LNG contracts are critical and PSO is committed to providing Pakistan with the best LNG contract price in Asia. The details of the LNG contract, once it is signed, will be made available on public forums as required under PPRA rules.
Fact 10: There is a fundamental difference between the oil market and the LNG market - oil is produced first and then sold; LNG is sold first and then produced. The expected LNG contract with Qatar is for a volume of 1.5 MTPA, or half of the current LNG regasification terminal’s committed capacity. The balance 1.5 MTPA is being sourced through other term contracts or spot procurement. Pakistan is expected to be a 12 MTPA LNG market within 5 years; the current LNG contract is less than 15% of this amount. Globally, over 90% of LNG procurement is done through negotiated term contracts as there is no reliable spot market for LNG. –To be continued
The writer is federal minister for petroleum & natural resources, who can be reached at shahid@airblue.com or by text at 0300-8282942.