ISLAMABAD: In a major policy move, the government has asked the state-owned entities to come up with a new LNG (liquefied natural gas) terminal in the public sector with dramatic speed to ensure additional gas deliveries by next winter (10 months) to meet a higher energy demand in the country.
At a recent meeting presided over by Prime Minister Imran Khan, the government blamed the sponsors of two private sector LNG terminals for moving slowly on their projects. Interestingly, private sector investors had been complaining at every forum about non-cooperation from the relevant entities, hampering their final investment decisions.
Gas shortages during the current winter have been blamed on poor planning, record international LNG prices and defaults by long-term suppliers, resulting in lower capacity utilisation of the existing two terminals.
The operators of the two terminals and the CNG sector had been claiming cheaper LNG import availability, but could not get support from public sector entities.
Sponsors of two private sector terminals blamed for moving slowly on their projects
“Against the backdrop of slow progress in the development of new LNG terminals by the private sector (Tabeer Energy and Energas), a consortium comprising state entities (port authorities, Sui companies and PSO) will work together for speedy development of a new LNG terminal in the public sector, preferably FSRU (floating storage and regasification unit) based, to bring new LNG by next winter (2022-23),” said an order issued by the Ministry of Energy’s Petroleum Division (MEPD).
Strangely though, the MEPD in separate communications had been repeatedly reminding the gas companies to ensure implementation of decisions of the cabinet and its various committees regarding allocation of pipeline capacity, finalisation of access agreements, gas transportation agreements, network code and land allocation for tie-in facilities to two proposed private terminals on a merchant basis — without any government guarantee or responsibility. Between December 21, 2021, and January 5, the MEPD wrote a series of letters to gas companies to complete their tasks and repeatedly noted that “reply from the DG (gas), SNGPL and SSGCL is still awaited”.
It said the decision was taken at a meeting, presided over by the prime minister on December 29, on issues relating to development of virtual LNG pipelines in Gwadar and Karachi and new LNG terminals in Karachi by Tabeer Energy, a subsidiary of Japan’s Mitsubishi Corporation, and Energas, a joint venture of four Pakistani business groups and Qatargas. The two new terminals had been demanding about 600mmcfd (million cubic feet of gas per day) each, but were told by the government that they could take final investment decisions on firm pipeline capacity of at least 350mmcfd.
The MEPD order said the meeting had also decided that the “Ministry of Maritime Affairs will lead the consortium for speedy development of new LNG terminal” and asked the gas utilities — SNGPL and SSGCL — “to prepare and submit a joint proposal within two weeks for speedy development of new LNG terminal to bring new LNG by next winter”.
Government officials said the development of a new terminal from scratch (proposal stage) to commercial operations was not possible in such a tight schedule and that too in the public sector as it has to follow mandatory timelines under procurement rules.
The two private entities have promised to achieve commercial operations in 18-24 months only after all agreements with the government entities are signed and sealed, but have been reporting resistance from their public sector counterparts on many counts, particularly with regard to pipeline capacity allocation for transportation of additional gas they plan to import.
An MEPD spokesperson, Zakria Ali Shah, said the relevant entities had already started working in the light of the decisions taken at the meeting chaired by the prime minister. The managing directors of Sui gas companies (SNGPL and SSGCL) already had a meeting on the subject last week and other stakeholders would join them over the next couple of days.
In reply to a question, Mr Shah said it was incorrect that gas companies had spare pipeline capacity that they were reluctant to allocate to the private sector and instead would now use for the public sector project.
Published in Dawn, January 10th, 2022