Sentiments roiled in LNG sector

Updated December 06, 2018


One party stands firm, two others rethinking investment plans. — File
One party stands firm, two others rethinking investment plans. — File

LAHORE: At least one of the three potential investors, Pakistan GasPort, appears determined to move ahead with its plan to build the country’s third LNG regasification terminal to import more than 5.5mtpa gas for selling directly to large consumers like private power producers and industry.

This has come despite policy uncertainty and delays in approval of the set of guidelines or Network Codes that allow private companies access and share (the existing state-owned) pipeline infrastructure for gas transmission.

“We have necessary government approvals, obtained provisional Oil and Gas Regulatory Authority (Ogra) licence and arranged Floating Storage Regasification Unit (FSRU). We plan to begin work on the facility in one month... and will target to meet all our deadlines. The terminal will be commissioned in the first quarter of 2020,” claimed Iqbal Z. Ahmed, chairman of the Associated Group (AG) that owns Pakistan Gasport, during an interview with Dawn.

One party stands firm, two others rethinking investment plans

The company is developing the facility - its second - at a cost of half a billion dollars in collaboration with Trafigura, a Singapore-based commodity trading and logistics house. It will have a regasification capacity of 750mmcfd.

But some energy sector analysts question Ahmed’s ambition.

“Pakistan GasPort has set a very ambitious target for itself given the fact that the two other consortia of local and foreign majors have already delayed their final investment decision (FID) or shelved their LNG terminal projects owing to uncertain LNG import policy of the PTI government,” an energy analyst at a brokerage house in Karachi said on condition of anonymity.

One of the other two consortia – Pakistan Energy Gateway comprising Engro Corporation, Fatima Group and Shell Exploration Company BV – has delayed FID on the project for at least one year and is unlikely to begin work on the project before 2020. Engro refused to comment.

But a Shell spokesman insisted the consortium remained committed to delivering the LNG import terminal in the “near future”. In an email response to questions sent by this reporter, he added: “We continue to engage with government on various matters, including domestic gas regulations and pipeline capacity. We remain committed to progressing to FID on the project as soon as possible.”

The other consortium, Energas, has also made "significant progress" towards development of a terminal, said Anser Khan, CEO of Energas Terminal Pvt Ltd (ETPL) in a statement emailed to Dawn.

Energy analysts list delays in the formulation of domestic gas regulations, limited pipeline capacity to transport gas from port to the energy-deficient Punjab, yawning gap between local and imported gas prices, and government policy of subsidising LNG use by exporters and fertiliser producers as a few other factors for the waning interest of investors in the development of new regasification terminals.

Additionally, NAB probe against existing terminal operators and opaque LNG (government-to-government) contract with Qatar, and the PTI statements suggesting that it planned to renegotiate tolling tariff with Engro and relocate its first terminal (which will mean its complete destruction and new investment) have also dampened investor confidence.

However, he said, the government has to decide if LNG is good or bad for the country. “If it thinks it is good then it should remove the regulatory lacunas to allow private sector to sell directly to the industry, CNG sector, fertile companies and private power producers. Deregulation of the LNG sector will increase competition in the market, bring down its price and attract private investment in pipeline infrastructure for gas transmission.”

At present, LNG imports are meeting almost a quarter of the current gas shortage with many fearing return of crippling electricity and gas shortages beyond 2020 if the impediments to the establishment of new LNG regasification terminals are not removed.

Published in Dawn, December 6th, 2018

An earlier version of this article stated that the ETPL consortium has been dissolved. The project's management says this is not true and the project remains active and is progressing towards terminal development.