ISLAMABAD: Amid increasing gas deficit, the government is reviving an underground gas storage project shelved almost a decade ago to plan higher imports in summers and bridge higher demand-supply gap in winters.

The Asian Development Bank (ADB) has agreed to undertake a technical study through its $575,000 financing with the support of a consortium of European oil and gas equipment companies.

Special Assistant to Prime Minister on Petroleum Nadeem Babar on Monday presided over a meeting with a delegation of ADB and the companies concerned for the development of underground gas storage facility.

He said the government was taking up Strategic Underground Gas Storage (SUGS) project to build emergency stockpiles of gas to deal with supply disruption amid country’s growing domestic and commercial demand especially in winter. “The construction of SUGS is part of the policy to improve energy security and affordability in the country”, he explained.

European consortium to undertake feasibility study

The meeting decided to complete the study by May 2021 and finalise the methodology for building the underground storage. Final report will provide blueprint for facility with respect to size, modulation and security supply of gas.

The government had requested the ADB last year to finance feasibility study. The ADB has agreed to provide $575,000 technical grant to Inter-State Gas Systems (Pvt) Ltd (ISGS) — a government entity — which will be the focal agency for the project. Recently, the ADB has completed its competitive bidding process and appointed the international consultant for preparing a feasibility study.

Project infrastructure could be funded through Gas Infra­structure Development Cess (GIDC), Babar said. He said the SUGS facilities were crucial for the country in view of committed supplies of imported gas under the international gas agreements and fast-growing gas demand in the country to keep pace with the economic progress.

The project is expected to significantly enhance Pakistan’s capability to provide uninterrupted gas supply throughout the year. Pakistan has been pursuing various gas import projects like Turkmenistan-Afghanistan-Pakistan-India (TAPI), Iran-Pakistan-India and LNG imports from Qatar and other countries. It is also planning to develop a cross-country pipeline named North South Gas Pipeline Project to transport imported gas to upcountry.

The ISGS through an international consultant had carried out a feasibility study for the construction of SUGS in 2007 selecting two gas fields in Sindh — Khorewah and Bukhari — for conversion to gas storage reservoir.

Unfortunately, with decline in indigenous gas and growing unfulfilled energy need in the country, stalled the progress. Moreover, sanctions on the importing gas from Iran and non-availability of surplus gas further deferred the development of said infrastructure between 2010 and 2017.

Based on terms of reference (TORs) agreed to by the government, the ADB carried out competitive bidding process, short-listed the consultants and recently appointed Ramboll as consultant for the underground gas storage study.

Because of contracts with Qatar, other suppliers of LNG and regasification terminals, the gas companies are finding difficult to utilize full gas quantities in summers and are unable to meet higher demand in winters. Similar natural gas import commitments with Turkmenistan would further aggravate the situation once the TAPI project comes on line in a couple of years. All these import contracts and commitments involve Take or Pay guarantees and involve substantial financial costs.

Published in Dawn, September 29th, 2020