LNG Import in Pakistan; Can it be a Game Changer?

Pakistan is currently facing a severe energy deficiency for many years now, because of merciless non productive use of its own energy resources mainly Natural Gas. Moreover, recent Govt lacked any long term planning in regard to conquer this immense energy requirements for the country and never seriously considered set up of new projects keeping in mind the ever mounting population.

LNG Import in Pakistan

The situation is so worse that the country’s requirement of Natural Gas daily is of about 6 Billion Cubic Feet (BCF) but the supply is about 4 Billion Cubic Feet. That’s why we see complete closure of CNG stations in the country now in winters and partial closure in summers. The intensive consumption of Natural Gas is in various sectors comprises of CNG, Fertilizer Industry, Garments Industry and the most significant and pensive electricity generation, which consumes around 27.5% of country’s total Gas production. Use of Natural gas in all these industries is because it costs minimal in comparison to many other energy alternatives.

So, to fill the 2 Billion Cubic Feet gap in demand and supply of Natural Gas, which is harming various industrial and service sectors, Govt of Pakistan is now the verge of importing LNG (Liquefied natural Gas) from Qatar.

Background of why thinking about LNG Import:

The humming of LNG import was came into being since PML-N formed Govt in Pakistan after 11th May, 2013’s General Elections. Govt thought of LNG import as a less time consuming and lucrative alternative of energy crisis in Pakistan. Although, there were two ongoing Natural Gas projects, that PPP (Pakistan people’s Party) Govt left unfinished, known as Turkmenistan-Afghanistan-Pakistan-India (TAPI) and Iran-Pakistan (IP) pipelines. But as these projects have some serious international apprehension and also required lot more time in their establishment. This was the time, when Govt of Pakistan anticipating the instant need of any alternate energy resource around, came across LNG import – as a quicker solution. This was also much needed to prevent industrial shutdown and avoiding thousands of people from losing their jobs, working in energy deficient sectors mentioned above.

Arrangement and Agreement for LNG Imports:

The Govt came into terms with brother Muslim Country Qatar in this regard, an oil and Gas rich GULF country. Qatar is the largest LNG producer of the world and also known as LNG King. Initially Govt kind of finalized an agreement with Qatar for importing 500 MMFCD LNG according to reports. The price for this deal was remained the talking point for many, but for obvious high priced logical reasons.

Government of Pakistan as per information, agreed upon the price of $17/mmbtu, without the cost of Regasification, which is a necessary process of converting liquefied natural gas (LNG) back to Natural Gas. Moreover, price was also excluding shipping and logistic obligation for this import from Qatar.

Hence, as soon as experts and Pakistani media started raising question regarding this prospective LNG Import pricing. For the reason that after research experts and even layman came to know that the agreed upon price was not market competitive. This conclusion came after people got familiar with that neighbor India, who is also Importing LNG from Qatar was doing it in the time period of October 2012 to July 2013, price ranging between $10-12/mmbtu, and the price was never hiked more than $11/mmbtu in 2013.

Therefore, the apprehensions concerning the high price tag attached with this LNG import was later considered valid by Govt. The effect of this criticism over LNG import agreement with Qatar, govt restrained from fixing the long term price for this Import. Now the Govt is considering adopting spot price formula for this agreement, which will allow Govt to secure market competitive price on the time of deal for the amount of import at that particular time.

Current Scenario for this Import:

The current standing of this significant import deal is that a Qatari delegation will soon visit Pakistan for finalizing this all important LNG import agreement with Pakistan. Also Petroleum Minister Shahid Khaqan Abbasi also said that the first consignment of LNG will arrive in Pakistan in initial days of February, 2015.

Also first LNG terminal having the capacity of storing 0.4 million cubic feet LNG per day is about to compete situated in Port Qasim Karachi. This pioneer LNG terminal is being established by ENGRO Pakistan, and ENGRO is also responsible for importing first LNG Consignment from Qatar in private sector, before Govt complete laying dedicated pipeline for this import.

Why Called Game Changer:

The reason behind it’s being said a game changing deal for Pakistan, is because it will cost about 30-35% cheap alternate energy resource in comparison with petrol. Therefore, as per latest reports, Govt is also thinking of converting diesel and furnace oil based power plant to LNG for ensuring the cheap electricity production in the country. As a result of all this common people of Pakistan can expect some sought of relief coming their way; this will be in the shape of contentious and economical availability of CNG and electricity.