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Govt, EETPL reach agreement on 230mmcfd LNG supply

Updated December 06, 2017

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Engro’s Elengy Terminal has the capacity to re-gasify 600 million cubic feet per day of LNG.—File
Engro’s Elengy Terminal has the capacity to re-gasify 600 million cubic feet per day of LNG.—File

KARACHI: The government and Engro Elengy Terminal Pakistan Ltd (EETPL) have reached an agreement for the supply of about 230 million cubic feet per day (mmcfd) of additional liquefied natural gas (LNG) at a re-gasification tolling rate of 17 cents per million British thermal unit (mmBtu).

This brings down the average tolling tariff at 47 cents per unit for firm LNG supplies of 630mmcfd through Engro’s floating storage and re-gasification unit (FSRU) that is now the largest source to the national transmission system, said EETPL Chief Executive Officer Jahangir Piracha on Tuesday.

He told an Asian Development Bank (ADB) press tour that Engro was partly compelled by public and media pressure to offer its spare re-gasification capacity at a significantly lower rate than its original tolling rate of 66 cents per unit and partly because of a clause in the agreement. The clause bound the LNG terminal operator to obtain government permission for the utilisation of this additional capacity. ADB provided a $30 million loan to EETPL.

‘Country saving $1.5bn per year in fuel substitution’

He said the agreement had been finalised and was in the process of approval by respective boards of directors. Under the terms of long-term service agreement (LSA), the government had guaranteed processing of 400mmcfd of LNG against terminal’s total capacity of about 630mmcfd for 15 years. He said the 17 cents per unit tolling tariff for additional LNG regasification was required for Engro’s additional expenditures.

After commercial operations of Engro’s FSRU, the government was able to secure a significantly lower bid of about 42 cents per unit from Pakistan Gas Port Limited (PGPL) for second LNG terminal now in final stages of commercial operations.

Mr Piracha said Pakistan was now saving around $1.5 billion per annum in fuel substitution through 630mmcfd of LNG instead of furnace oil even though the government was conservatively putting the furnace oil replacement saving at $1.2bn per year.

Responding to a question, he said the actual savings would be significantly higher when seen in the context of efficient LNG based plants now being lined up for commercial operations and would run at up to 62 per cent efficiency compared to a maximum of 45pc plant efficiency a few best maintained furnace oil-based projects could run at. “It is like shifting corroborator based car engines to EFI (efficient fuel injection) engines that make the big difference,” he explained.

Responding to another query about Engro’s plans for another terminal, Mr Piracha said the four member consortium was still working on the modalities but the project was moving ahead.

He said a consortium comprising oil major Shell, international fuel trader Gunvor, Fatima Group and Engro Corporation would be a totally private sector project and involve no government guarantee, financing, or support and would deal with private sector investors and businesses.

Head of EETPL Operations, Adil Mushtaq said the terminal had so far processed a total of 126 LNG cargos since its inception in March 2015 including six initial consignments supplied by the FSRU itself when Qatargas was working through the safety and security mechanism. All these shipments have together injected a total of 7.4m tonnes of LNG into the system.

He said Qatargas had been operating Q-Flex vessels – medium sized ships – at sub-par capacity because of port constraints. He explained the Q-Flex vessels were bringing 151,000 cubic meters per trip against its capacity of 210,000 cubic meters. The Port Qasim authorities need to improve the channel and create birthing pockets (space) for allowing crossing of multiple ships to ensure maximum capacity utilisation of 142,000 cubic metre per ship that would enhance supply from the FSRU to 690mmcfd.

The port operator is charging a fee to ship and terminal operators to raise funds for additional dredging which should take place at the earliest. Responding to a question, he said Qatargas has been supplying LNG through 74 conventional ships having lower capacity due to port constraints and inducted only 26 Q-Flex carriers, at sub-optimal capacity, after these constraints were party overcome early this year. The remaining 20 ships were arranged through spot purchases.

Talking about the terminal availability, Mr Mushtaq said EETPL operating the FSRU at 98.5pc availability factor against 95.5pc required under the agreement.

He said Engro was one of the top 15 global companies operating such an advanced FSRU developed in a record 330 days- five days ahead of schedule in a high risk sector despite security concerns.

LNG is a cleaner fuel substitute to the expensive alternates like diesel, furnace oil, LPG and kerosene. Recent domestic prices for different fuels, according to Engro executive stood at LPG $15.13 per mmbtu, HSD $17.7 per mmbtu, petrol $18.23 per mmbtu and RLNG $6.74 per mmbtu.

Published in Dawn, December 6th, 2017