Pakistan plans LNG import ramp up [NGW Magazine]

With indigenous supply of natural gas consistently falling well short of demand, Pakistan has been relying on LNG to fill the gap. This dependence on imported gas is expected to continue in the short to medium term. Pakistan has two import terminals located at Port Qasim, near Karachi.

It started importing LNG in 2015 with the commissioning of the Exquisite FSRU and commissioned its second FSRU, BW Integrity, in late 2017. The country has gradually ramped up imports over the last four years. It imported 5.8mn metric tons of LNG during the financial year 2017-2018 (July-June), according to data published by Port Qasim Authority. Data for the 2018-2019 financial year was available till April, which showed that imports were 5.14mn mt. Imports this year are most likely to top previous year’s figures when the official final numbers are out.

With no immediate substantial increase in supply of local gas expected, Pakistan’s dependence on LNG is set to continue. The government is now looking to add around 400mn ft³/day of regasified LNG to its gas distribution system, the petroleum division of the energy ministry said late last month on Twitter. The government wants to secure the contracts for this additional supply by end of this calendar year, it said. Recently, state-owned Pakistan LNG floated a tender seeking to contract supply of 240 LNG cargoes over the next ten years. The company is seeking two cargoes of 140,000 m³ every month, which would be delivered on ex-ship basis to Port Qasim. That would provide about 200mn ft³/day, or half the total. The petroleum division did not say where it will source the LNG from, but stated that the US and Australia are going to be the next major suppliers to the LNG market.

According to Reuters, Pakistan’s 240-LNG cargo tender has reportedly attracted the interest of the Italian major Eni, PetroChina as well as Azerbaijan’s Socar and the Swiss trading house Trafigura. Citing sources close to the matter, the news agency reported that four companies are looking to grab a share in the 10-year tender estimated at $5bn-$6bn.

At present, Pakistan has a long-term LNG contracts with Qatar. In 2016, Pakistan State Oil and Qatargas signed a 15-year agreement for supply of 3.76mn mt/yr at a price of 13.36% of Brent. Pakistan LNG also has a long-term deal with Eni, which commits the Italian company to supplying 0.75mn mt/yr.

Import rules ease; plans for the third terminal

As volumes of LNG imports grow, Pakistan will need to enhance its infrastructure. Keeping this mind, the government has exempted import of new floating storage and re-gasification units (FSRUs) from duties and taxes, Pakistani media reported late-July.

This decision by the government will allow Engro Elengy Terminal Pakistan to replace the existing unit, Exquisite, with a new one with additional capacity. The LNG terminal presently in operation has a handling capacity of 690mn ft³/day whereas the new FSRU would have capacity of 790mn ft³/d, the media reports said. Engro had brought an old vessel, which had been used in Kuwait for five years.

Pakistan’s Federal Board of Revenue (FBR) has issued a statutory regulatory order (SRO) for waiving taxes and duties on temporary import of floating LNG units, local media reported.

Pakistan is also now planning to set up the third terminal at Port Qasim. The Economic Co-ordination Committee of the cabinet early in July approved the resolution of the Port Qasim Authority board to allow an amendment of its master plan to accommodate the prospective third LNG terminal at Port Qasim.

At present, the two LNG terminals are supplying about 1,100mn ft³/d of regasified LNG to customers downstream. Of this, the power sector is consuming 790mn ft³/d and the fertiliser industry 180mn ft³/d, according to Pakistani media reports.

Meanwhile, the government late-July gave Trafigura a 10-year licence to import LNG and distribute and sell re-gasified LNG in the country. This is the country’s first licence in private sector for LNG import aimed at improving availability of gas to different industries and also optimal utilisation of LNG terminal, local media reported.

Qatari deal mired in controversy

Although LNG demand growth in Pakistan looks promising, the industry has been mired in controversies. Ex-prime minister of Pakistan Shahid Khaqan Abbasi was arrested by National Accountability Bureau (NAB) mid-July in connection with alleged corruption in awarding the Qatari LNG import contract.

Abbasi, who is a senior member of the Pakistan Muslim League (PML-N), succeeded Nawaz Sharif when the latter was dismissed by the supreme court in 2017 and sentenced to seven years in prison late last year for corruption. NAB has alleged that Abbasi misused his authority in awarding the contract for an LNG terminal to 15 companies in a non-transparent manner. NAB said Abbasi was charged on involvement in a corruption scandal in Qatari LNG import deals during 2013 to 2017 when he was the petroleum minister. 

Pakistan State Oil and Qatargas signed in 2016 a 15-year sale and purchase agreement for 3.76mn mt/yr at a price of 13.36% of Brent oil. The NAB also signed the warrants for the arrest of another PML-N leader, Miftah Ismail, and of a former managing director of Pakistan State Oil, Sheikh Imranul Haque. In early-August both Ismail and Haque were arrested by the NAB.

Reviving local gas production

Although Pakistani government has on numerous occasions said that LNG will continue to play an important role in country’s overall energy mix, the focus remains on increasing domestic gas production. Pakistan’s domestic gas production has remained stagnant in the range of 34-36bn m³/year over the last decade, according to BP Statistical Review of World Energy 2019.

Early in July the government said it planned to auction 35 new oil and gas blocks in next few months in order to boost domestic production, according to local media reports. The government wants to invite more foreign and local companies to search for oil and gas in Pakistan including offshore in the Indus Delta.

"We have huge reserves of oil and gas in our offshore areas and will continue our attempts until they are successful," special assistant to the prime minister on petroleum, Nadeem Baber, was quoted saying by the local press. He pointed out that more foreign companies will be invited to start exploration activities in Pakistan. "Exxon is also interested in starting exploration activities in other blocks," he said.