TWO public-sector LNG companies have raised safety concerns over the excessive utilisation of the country’s two existing LNG terminals. A joint report by Pakistan LNG Ltd and Pakistan LNG Terminal Ltd says that both terminals are overstressed and the LNG value chain is very fragile when compared to global standards owing to inflexible infrastructure constraints. It also points out that both terminals could face operational and safety risks. Contrary to perceptions, the combined utilisation of the two terminals has been around 84pc against a global average of 43pc, which leaves very little flexibility to handle shocks. Even countries such as Kuwait and Argentina, which rely on floating storage and re-gasification units like Pakistan, have a far lower utilisation rate. The reasons for overstressing the existing LNG import capacity are obvious. First, its inability to attract investment in new terminals means the government has no option but to fully use the existing facilities to meet the country’s increasing LNG import needs. Second, the failure to build LNG storage requires the authorities to overstretch the existing capacity, especially during winters when the demand for imported gas peaks, which shows up in lower-than-world-ratio ‘re-gas to storage’ and ‘import capacity to storage’.
There are several factors, including policy flaws, pipeline capacity constraints as well as malicious propaganda against the sponsors of the existing terminals, which have blocked or discouraged private investments in new terminals. Although the government has ‘provisionally’ allowed two more companies to set up terminals, the unavailability of sufficient pipeline capacity to bring imported gas to Punjab — where the most demand exists — is keeping them from breaking ground. For unknown reasons, the government is also not allowing the existing terminals to increase capacity for bringing more gas for private-sector customers. Meanwhile, the regulator is yet to approve ‘third-party access rules’ and the ‘inter-user agreement’ that would allow terminal operators to sell imported LNG to buyers including the textile, power and fertiliser industries. With Pakistan’s gas demand increasing on account of economic growth and higher capacity utilisation, it is crucial for the country to build new terminals as well as invest in LNG storage and pipeline infrastructure. In recent months, we have seen gas companies rationing gas quantities at the expense of industrial output only because we do not have sufficient LNG import infrastructure to bring in the quantities required. Time is of the essence in this case.
Published in Dawn, March 9th, 2021