The energy experts have recommended to the government to import LNG only if it is 20 to 30 percent cheaper than furnace oil otherwise replacing it will be worthless with diesel for thermal power generation.

Commenting on a summary moved by the Ministry of Petroleum and Natural Resources, the Ministry of Planning and Reforms have recommended the government that since a large portion of thermal power is produced by using furnace oil therefore try to purchase LNG only if it is cheaper than furnace oil, an official source told The Nation here on Sunday.

Earlier the Ministry of Petroleum and Natural Resources was talking of replacing the furnace oil with LNG but after a massive reduction in furnace oil prices they have started comparing it with diesel. The total consumption of diesel in the power sector was mere 300000 tones in 2014-15 but the use of furnace oil was eight million tones.

The Ministry of Petroleum and Natural Resources has recently asked the comments of various ministries and divisions on the summary, moved to the Economic Coordination Committee (ECC) of the Cabinet, for the LNG import. The ECC will consider the LNG sale-purchase agreement, which will permit the Ministry of Petroleum to sign a government-to-government deal with Qatar. Ironically, even in summary, the ministry of petroleum and natural resource once again failed to disclose the pricing formula for the imported LNG.

There is no second opinion that Pakistan needs imported fuel to fulfill its energy requirements but it must be cheaper than furnace oil, which is the main pillar of our thermal power generation, the official maintained.

“In 2014-15, the total import of diesel was 2.5 million tones whereas its use in the thermal power generation was less than one-eighth of the total import or mere 300000 tones and the rest was used in transportation and agriculture sector, the official informed. The total cost of 2.5 million tone diesel is about $2 billion and the value of diesel being used in power sector is much less and its conversion to LNG will not bring that much benefit to the country.

“I don’t know why the government claims that by replacing diesel with LNG in the power generation the country will save Rs 100 billion,” the source maintained. “The total import price of 300000 tones diesel is far less than Rs 100 billion so how the country can save such a big amount by switching to LNG,” the official questioned.

“On the other hand the import of furnace oil was 6.5 million tons and its total cost is about $6 billion,” the official maintained. The use of furnace oil in thermal sector is about eight million tones against the import of 6.5 million tones and the deficit of 1.5 million tones are being produced locally, the source informed.

Energy-hungry Pakistan is going to have a long-term contract with the Qatari government for the import of the Liquefied Petroleum Gas (LPG) soon, and Islamabad expecting to make this deal below $7/MMBtu.

Its volume will be 1.5 million tons per annum (MTPA) of LNG with increase of three MTPA in three years. According the government estimates the country requirements will be around 15 MTPA in next five to six years.

Around half of the country’s primary energy source is natural gas, but unfortunately its supply is 4000 million cubic feet per day (MMCFD) against demand of the 6000 MMCFD. Currently, around 2000 megawatts of power plant are idle because of oil and gas supply. In Pakistan, the unconstrained demand for gas is estimated to be 8,000 MMCFD or more than double of the current domestic production.

The federal minister of petroleum and natural resources Shahid Khaqan Abbasi has recently claimed that “LNG is 5 to 10 percent cheaper than HSFO, 20 percent cheaper than LSFO and 50 percent cheaper than the High Speed Diesel Oil”.

However the minister made it clear that “Some so-called energy experts are criticising government for the LNG prices and are comparing the price LNG with the Furnace Oil but in reality both cannot be compared. LNG can be compared with Diesel oil and not furnace oil as only diesel fueled power plants has the option to be either operated on LNG or Diesel”.

If the LNG cannot replace furnace oil and it is also too much expensive for the fertilizer sector so the only buyer for the RLNG is CNG sector, the source maintained.

It is pertinent to mention here that as compared to the local gas, the cost of imported LNG is about 591 percent higher for the old fertilizer plants and 1114 percent for the new fertilizer plants.