ISLAMABAD: Engro Elengy Terminal Limited (ETPL) — a subsidiary of Engro Corporation — on Tuesday said the government had failed to sign a deal for import of liquefied natural gas (LNG) with any supplier and would be liable to pay $272,000 per day to Engro with effect from March 31, 2015.

It said as committed the Engro’s $135 million LNG terminal was ready to start up provided the government strikes liquefied gas import deal.

“The terminal has been completed in a record time and now we are waiting for the government to finalise LNG procurement deal,” Shaikh Imran-ul-Haq CEO of ETPL said. “If the commodity is not delivered by March 31, 2015, the government would be liable to pay the capacity charges.”

The FSRU Exquisite, the floating storage and re-gasification vessel is anchored at Dubai Dry docks and will be ready to make sail by March 15, 2015.

“As per the agreement, the government will have to pay $272,000 per day for not importing the LNG by March 31. The government has so far virtually failed to ink an LNG deal with any country, including Qatar,” the company said in a statement.

According to Engro, international dealers were hesitant to supply LNG to Pakistan for power sector, which is virtually hit by circular debt and Independent Power Producers (IPPs) were not willing to make an agreement with LNG supply for back-to-back letters of credit.

Talking about their bid regarding second FSRU terminal at Port Qasim, Haq said they were hopeful about the result. He said that LNG import was inevitable for the country as it would address several energy scarcity issues.

“Given the energy demand of the country, only LNG import would not be sufficient. Pakistan will have to import other commodities also to streamline its energy mix,” he added.

Engro’s LNG terminal is completed even before the financial close. Engro Corp funded this project under bridge loans. However, recently Asian Development Bank (ADB) has approved a $30 million project loan for the terminal.

Haq informed that the money would be transferred to them by early next month, which would have to be retired in 8-10 years.

Along with ADB’s loan, International Finance Corporation is expected to fund 15pc of the project cost and local banks will finance around 35pc. The rest of the project financing will come from equity proceeds, for a total cost of around $135 million.

The fuel, suitable for use at most of the country’s combined cycle power plants, will be supplied to Sui Southern Gas Company’s gas distribution network via a new high pressure pipeline.

The plant has the capacity for re-gasification of up to 600mmcfd. The government had tendered for its requirement of 200mmcfd, but Engro has developed a surplus capacity setup.

Engro is in negotiation with other parties for the utilisation of its surplus capacity.

SSGC has tendered for another terminal at Port Qasim, while a consortium of three investors is developing plans for another facility in nearby Karachi.

Pakistan urgently needs to utilise its existing power generation capacity fully, while reducing its reliance on costly imported diesel fuel for electricity generation.

Re-gasification of LNG will allow generation facilities to reach their maximum potential, using a cleaner and more efficient fuel, and will support the country’s push for greater energy security and diversification.

The converted fuel will help the government make an estimated savings of about $1.0 billion per annum on its current fuel import bill of nearly $15 billion.

Published in Dawn, March 11th, 2015

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