ISLAMABAD: Almost all the major contenders in the controversial $20 billion Mashal LNG Project are again in the race to become leading importers of liquefied natural gas as domestic energy shortages continue to rise dramatically.
A senior government official told Dawn on Sunday that Shell, Vitol, Fotco and 4Gas had separately approached the ministry of petroleum and Oil and Gas Regulatory Authority (Ogra) seeking permission to import LNG. Their requests have come even though the government has already allowed three fresh parties to import 500 mmcfd of LNG each.
“Fotco, Shell and Vitol have already applied for the import licence when informed by the relevant authorities that they could also avail the government’s third party access regime”, he said, adding the three firms also have backed up their applications with indications of availability of firm supply commitments which obviously would need to be given legal support through fresh contracts from suppliers abroad.
Likewise, 4Gas that was the main party affected by the government decision to start a fresh process for LNG imports after the Mashal LNG project became controversial in the Supreme Court of Pakistan has also expressed its interest to separately pursue its LNG imports.
“We have encouraged 4Gas to apply for an import licence that would be processed fairly and without any prejudice,” the official said.
The official said the 4Gas, Shell and Fotco are real potential LNG importers in view of rising gas shortfalls at home and their links with the major LNG producers in Qatar but the major factor in their success would be the date of gas deliveries.
He said the fresh interest in LNG imports was also triggered by a demand by Global Energy of Turkey for provision of sovereign guarantees, permission for subletting its capacity allocated by the Ogra and a buyer’s guarantee for sale of LNG because of energy sector circular debt and falling foreign exchange reserves.
A meeting presided over by prime minister last week decided not to accept Global Energy’s demands because these were found contradictory to the conditions set out in the expressions of interest. The government believed that any deviation from the EoIs could lead to fresh litigation and further delay the LNG imports.
“We will not allow any party to exploit the energy shortages and get undue benefit in pricing or guarantees on behalf of the government”, the official said.
Officials said it seemed the Turkish company may not be able to deliver LNG imports by the deadline of October 2012 but two other competitors Engro Corporation and Pakistan Gasport would become more comfortable to implement their import projects because of their own market and links with buyers in the domestic market.
He said the gas shortages in the country imply that more than three companies may be able to start LNG imports.
The government in October this year made capacity allocations to three companies Global, Engro and Gasport for import of 500 mmcfd of LNG each, with first delivery deadline in October next year. The three companies were required to provide performance guarantees of $10 million each to meet their LNG delivery deadlines.
Global Energy of Turkey has to meet delivery deadline of October 2012, followed by Engro Corporation in December 2012 and Pakistan Gasport in 2014.
These companies were now required to submit their timelines for the import while two gas utilities SNGPL and SSGCL would arrange Rs1.2 billion financing to put in place infrastructure to receive LNG to be imported by the three companies.
The government has imposed gas development levy on domestic natural gas to raise financing for gas pipelines and related infrastructure required to pump imported LNG to buyers – power companies and textile industry from Karachi.
The Ogra had already issued construction licences to the three companies to set up LNG terminals on a fast track basis to offset severe gas shortfalls that are currently estimated at about 1.9 billion cubic feet per day.
About 500 mmcfd of LNG could produce about 2,500mw of electricity. Because of higher import costs, LNG would primarily be used for power generation.
The import of LNG and its utilisation infrastructure is expected to be completed by end of next year that would include laying a separate pipeline to cater for increased capacity for transportation of gas from Port Qasim to Punjab province.
The PQA was already working with investors to develop a jetty and terminal facilities for handling LNG. Under the Third Party Access rules now finalized by the Ogra, LNG importers would use pipelines of gas utilities for transportation of the fuel across the country.
The third party access rules were put in place by Ogra after the un-ceremonial demise of Mashal LNG import plan. The flagship Mashal LNG import plan that became victim to political and bureaucratic wrangling, and ultimately called into question bythe Supreme Court of Pakistan, had been terminated by the government, without making a public announcement, although the court had only called for ensuring transparency in the process.