LNG import terminals, to be built in 12-15 months, will help cope with gas crisis

Pakistan is all set to install two more liquefied natural gas (LNG) import terminals over the next 12-15 months to deal with the ballooning gas crisis after the government approved connection of the terminals with transmission and distribution network from Karachi to upcountry areas.

The commercial launch of the two terminals, being built by Tabeer and Energas, will double gas storage capacity of the country to 10 days compared to the existing capacity of five days.

The terminals are being set up by the private sector, meaning that the government will not be liable to pay capacity charges if it does not utilise the facilities.

It is pertinent to mention that the government pays up to $272,000 per day to each of the two existing LNG terminals.

The new terminals will directly sell imported gas to industries and commercial and domestic consumers at competitive prices instead of selling through the government. However, the state will always have the option of gas import through the new terminals.

The government has allowed, in principle, each of the two terminals to transport 300-350 million cubic feet per day (mmcfd) of LNG through the network of Sui Northern Gas Pipelines Limited (SNGPL).

“They are expected to formally ink a gas transportation agreement (GTA) in the next one to two months,” said an official associated with one of the two companies while talking to The Express Tribune.

The total cost of constructing the two terminals is estimated at around $1 billion. “It costs around $500 million to construct a jetty and acquire a Floating Storage and Regasification Unit (FSRU),” he added.

“The government has facilitated the allocation of pipeline capacity firm offer to 2 upcoming (LNG import) terminals,” said Federal Minister of Energy Hammad Azhar on his official Twitter handle on Saturday.

“The new terminals will have no take-or-pay liability (daily capacity charges) on the government like previous terminals and they will be based on business-to-business models,” he said.

“These measures will enhance the capability of the system to handle imported gas in a cost-efficient manner.”

The industry official termed the inking of the gas transportation agreement a must prior to the start of construction of new terminals. “A terminal can be set up in around one year,” he said.

Tabeer and Energas had announced a few years ago that they would establish LNG terminals at Port Qasim in Karachi. However, it took a long time to acquire construction licences and get permission to connect the terminals with the gas transmission and distribution network across the country.

Each terminal would have installed capacity to import 1,000 mmcfd of LNG, however, they would transport just 300-350 mmcfd until the North-South pipeline was laid, he said.

“The government is moving fast on finalising details of PakStream gas pipeline project (formerly called North-South pipeline) with Russia,” Azhar said on Twitter.

At present, Engro and Pakistan GasPort facilitate the import of a total of 1,200 mmcfd of LNG but the decrease in gas production from local fields is widening the shortfall, which results in outages. The country set up the first LNG terminal in 2015.

Local oil and gas exploration firms produce around 3,400 mmcfd. Accordingly, a total of 4,600 mmcfd of gas is made available in the country through SNGPL and Sui Southern Gas Company (SSGC) against the requirement of 6,500 mmcfd.

Power producers are the largest users of imported gas. Besides, fertiliser manufacturers, CNG fuel stations and textile manufacturers also consume LNG since the locally produced gas remains unavailable to them.