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Govt orders increase in LNG imports, furnace oil stocks

Updated February 14, 2019

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The Power Division will require about 1,000 million cubic feet of LNG per day starting May-June.— Reuters/File
The Power Division will require about 1,000 million cubic feet of LNG per day starting May-June.— Reuters/File

ISLAMABAD: The Cabinet Committee on Energy (CCOE) on Wednesday asked the power and petroleum divisions to line up additional imports of liquefied natural gas (LNG) and build furnace oil stocks before the advent of summer months.

Presided over by Finance Minister Asad Umar, the meeting was informed that the Power Division would require about 1,000 million cubic feet of LNG per day starting May-June for which the import procurement process should begin immediately. It was expected that peak summer demand more than double and go beyond 25,000MW from around 11,000-12,000MW at present.

Interestingly, the two LNG regasification terminals have a combined processing capacity of about 1,390mmcfd of LNG while the existing pipelines do not have the space to transport more than 1,200mmcfd. Interestingly, the regasification of LNG at both terminals seldom went beyond 1,000mmcfd. This is despite the fact that LNG and power demand in the system is much higher.

In addition to power sector’s 1,000mmcfd requirement in summer, system demand for LNG is growing by 8-10 per cent per annum with increased pressure on CNG, fertiliser, industrial and residential sectors. On top of that, domestic gas sources are also depleting at the rate of 1-2pc every year.

It has been reported that there is emerging LNG demand in the Southern Gas Company Limited (SSGCL) system mostly from the CNG and industrial sectors.

SSGCL representatives said the full 1,400mmcfd capacity of two terminals could not be fully utilised without augmenting the pipeline network. For the existing capacity to be fully utilised, a 17-km additional pipeline is required to be laid between the two LNG terminals at Port Qasim and Pakland Cement in Malir. The process could be completed in 2-3 months before peak summer season.

The committee expressed concern and stressed that such gaps should come to an end at the earliest. It further noted that these gaps were not only creating difficulties for various sectors of the economy but also resulting in expensive LNG processing costs to the consumers for unutilised capacity. For example, it was reported that about $45million additional cost was paid to second LNG terminal of Pakistan Gas Port for its unutilised regasification capacity as required under the agreement. The capacity utilisation at this terminal varied between 220-450mmcfd against its full capacity of more than 750mmcfd.

The committee was also informed that inability of the Power Division to ensure timely LNG demand had also been causing problems in the past.

According to sources, secretary power said that coordination with the Petroleum Division was being improved to place timely orders for LNG to enable the Pakistan LNG Limited and PSO to issue international tenders and make arrangements. It was reported that 10-12 weeks were required to complete LNG import process.

The committee allowed the SSGCL to construct the 17-km pipeline from Port Qasim to Malir to fully utilise the terminal capacity so that 200mmcfd of additional gas could be transported to the system. The Petroleum Division was directed to extend maximum support to the gas company in this regard. The Petroleum Division was also asked to make arrangements for import of additional LNG quantities so as to utilise full terminal capacity and meet demand in the system, particularly in the power sector.

The committee further directed the Power Division to build sufficient stocks of furnace oil to meet additional electricity demand in summer. In the meanwhile, the division has been asked to make arrangements at Port Qasim for export of furnace oil soon after August when the fuel would no longer be required by the power sector.

Sources said that secretary power also briefed the committee about the campaign against electricity theft, reduction in transmission and distribution losses and the overall electricity demand and supply situation. It was also reported that the Sui Northern Gas Pipeline Limited (SNGPL) did not have complete agreements with all the power plants for LNG supplies and the process should be expedited.

The sources said that the SNGPL reported to the government that the Engro LNG terminal was also proceeding for scheduled maintenance as per permissible under the contract. The terminal will remain unavailable for three days — beginning February 14 morning to Saturday night. The shutdown was earlier planned to start on February 13 but was delayed due to late entry of PSO’s LNG carrier into Port Qasim owing to high winds.

On the occasion, the SNGPL explained that its role in the LNG supply chain was limited to the extent of carrying RLNG from SSGCL system and delivering it to the end consumers. It said that while sitting the fag end of supply chain, the SNGPL was not responsible for import of RLNG cargoes or its regasification. In the given circumstances, the distribution company was constrained to keep RLNG supply suspended to fertiliser, CNG and non-zero rated industry till resumption of RLNG supply from Engro terminal operator on February 17, depending on maintenance of minimum system packs required for transportation.

Published in Dawn, February 14th, 2019