Study of locations for new LNG terminals ordered

ISLAMABAD: As competition among private investors increases, the government has ordered a scientific examination of all feasible locations for new liquefied natural gas (LNG) import and processing terminals, including the possibility of expansion and dredging of the main channel that has been facing acute traffic congestion.

This comes at a time the Pakistan Tehreek-i-Insaf government is grappling with a delay in induction of third LNG terminal to minimise the increasing gas shortages next winter and beyond. The delay has been caused by a last minute cancellation of bidding for the third terminal under mysterious circumstances during the tenure of the previous government.

At least five major international and local firms are lobbying for permission by the government to set up next terminal in the private sector. Some of them are: Shell, Engro, ExxonMobil, Energas, Gasport, Trifugura, Mitsubishi and Global.

Delay in induction of terminal will contribute to increase in gas shortages next winter

At present, two terminals are functional at sub-optimal capacity even though consumers continued to face shortages until last week when demand significantly fell and the government and the gas utilities struggled to find consumers as pipeline pressure touched dangerous levels.

The government entities have so far discouraged private parties to arrange their own import cargos for private consumers apparently amid fears that lower LNG import prices could call into question their long-term supply contracts.

Informed sources said the Port Qasim Authority (PQA) had initiated bidding process in February 2018 for a third terminal at the existing location of two terminals. Within a few days, the bidding was postponed and then the government removed the then chairman of the PQA. His successor, with the help of Pakistan LNG Terminal Ltd officials, prepared a technical report, leading to cancellation of the bidding process on the last day of the Pakistan Muslim League-Nawaz government.

The sources said the technical team of the PQA was not taken on board and the director general of the authority was reported to have put on record that he had been bypassed on the matters of site selection and rejection.

The country continued to face shortages in the recent winter and the delay will further help the existing terminal operators and importers to enjoy monopoly over LNG imports until the winter of 2020.

It was against this background that the Economic Coordination Com­mittee (ECC) ordered the Ministry of Maritime Affairs (MoMA) to “take all necessary steps for establishment and operationalisation of third LNG terminal by winter 2020”.

It also ordered the ministry to expedite a scientific study for identification of a suitable exclusive LNG zone at Karachi ports for establishment of LNG terminals. The study will also look into all aspects of land-based LNG terminals viz-a-viz floating storage regasified unit (FSRU).

The MOMA was also directed to explore the possibility of establishment of additional LNG terminals at the main channel i.e. existing site of LNG terminals, with identifying the cost requirement for dredging and widening of the main channel.

It was reported by various stakeholders that normal traffic was compelled to stay away from the main channel sometimes for weeks during the period LNG offloading because of safety conditions and oil companies had been protesting over blockade and resultant higher transport charges of their cargoes.

The ECC also decided that the government would no more provide any financial and off-take guarantee for future LNG terminals. The ECC also directed the petroleum division to submit a summary on RLNG pipeline projects.

The PQA had identified in 2011 Jharri Creek/Chann Wadoo as a potential LNG zone for future LNG terminals while Chara Creek was also identified as a potential site. The PQA has already started process for hiring a consultant firm to undertake LNG zone study which would not be available before August this year.

In view of the projected demand of LNG in near future, the MOMA argued that Jharri Creek was a suitable site because it had no adverse impact on normal port traffic, as the site was on an alternative channel, away from the main port, and would be connected through a pipeline network of about 25km. The drought at the location was also feasible to accommodate larger LNG carriers like Q Flex vessels, instead of smaller vessels at present having higher costs.

The MoMA argued that the existing two LNG terminals at the Port Qasim were based on “take or leave” basis, costing the government more than $0.5 million per day even if no processing took place, which placed undue financial burden on the government.

The future contract is also proposed to ensure that “the supply of LNG is not interrupted due to war or any other contingency and that FSRU is not withdrawn by the owner on any pretext whatsoever”. Also, all future LNG terminals would be contracted without any guaranteed payment by the government.