“The foreign ship comes every fourth or fifth day,” said Abdul Rehman, a fisherman at the village of Rehri Goth, pointing towards the sea. He knows because the day the ship arrives, “a helicopter hovers from the sky and several MSA [maritime security agency] boats patrol the sea”.

That day, the fishermen from the goth dare not go anywhere near Port Qasim Authority (PQA), a deep-water seaport at Karachi, on the northwest edge of the Indus delta.

The cargo the vessels are bringing, every few days, is imported liquefied natural gas (LNG) to the two terminals, built at the port, where this fossil fuel is regasified and distributed through the Sui Southern Gas Company (SSGC) pipeline, the state-owned natural gas transmission and distribution company, and taken to Punjab.

Up to seven million tonnes of LNG was imported last year. A major chunk of this comes from Qatar Energy — the producer with which Pakistan has long term contracts — as well as suppliers like the Italian multinational oil and gas company ENI and the Singapore-based Gunvor. Some more is bought from the same suppliers at the spot rate when the gas runs out.

Today, Pakistan is struggling to buy between eight to 10 cargos — on average, an LNG carrier carries approximately 62,000 tonnes of LNG or natural gas — a month, although it needs 14 to generate enough electricity as well as meet its industrial needs.

Clearly this is not enough for Pakistan’s needs.

Not surprisingly, the LNG being imported has brought little relief for its people, with an increasing number of urban homes resorting to using LPG cylinders in the kitchen and to fire the water geysers, with the industries, especially in Karachi, turning to diesel, over the last several years.

According to a May 2021 report by the National Transmission and Dispatch Company, by 2020, the total number of electricity consumers reached 29,957,369, of whom 25,803,759 belonged to the domestic category, 3,245,508 belonged to the commercial category, 348,087 consumers fell under industries, another 344,689 were agriculture consumers, bulk supply consumers stood at 4,397, public lighting connections were recorded at 10,932 and 199,970 consumers were categorised as general services consumers.

During the year 2020, domestic consumption had a share of 47,643 gigawatt hours (GWh), commercial consumption used 6,260 GWh, industrial consumption stood at 21,489 GWh, agriculture consumption had a share of 9,642 GWh, while 7,757 GWh was consumed by other categories.

Last year, industries and the transport sector continued to suffer heavy losses. In 2021, gas supply was suspended four times — in January, June, September and then in December.

But the summer is not going to get any easier either for Pakistan. Gunvor, with whom Pakistan had signed a five-year contract — which ends in June 2022 — to provide cargos at 11.6247 per cent of Brent, backed out again in March, for the second time this year. It had pulled out twice last year. It has also informed Pakistan that it would not be able to provide LNG cargos in its remaining tenure scheduled to arrive on April 15, May 14, and June 4 and 9, 2022.

Infinite gas

Going by Worldometers' statistics, with 24,700,000 million cubic feet (mmcf) of gas reserves, Pakistan stood 29th in the world on the natural gas map as of 2015 and was left with just 12 years worth of gas.

Today, Iran’s reserves are 32 times higher, Russia’s 54 times greater and Qatar from whom Pakistan is buying LNG, has 29 times more gas.

Until 2006, natural gas formed the largest fuel source used to produce energy, peaking at 50.4pc — according to the Pakistan Economic Survey 2006-07 — of the fuel mix. Since 2008, however, it has seen a steady depletion.

But the demand for gas has continued to grow and the government decided to prioritise allocating gas to homes, commercial and some industrial sectors at the expense of the power generation industry.

As a result, the thermal power plants, relying more on imported petroleum products, began producing expensive electricity. The gas cutoff hit the energy-intensive sectors and effectively caused the closure of many industries, with power outages of up to 12 and 18 hours a day in urban and rural areas.

According to a 2015 paper published by the Pakistan Institute of Development Economics (PIDE), power outages in 2011 led to an industrial output loss in the range of 12pc to 37pc. Another 2015 report by the United States Institute of Peace (USIP) said it resulted in an annual loss of about 2pc of the GDP.

The Pakistan Muslim League-Nawaz (PML-N) party had won the 2013 elections, pledging it would wipe out power outages by 2017.

LNG comes in

The PML-N government started looking toward neighbours and around the region to buy gas through pipelines. While that was happening, it still needed some immediate energy fix too.

One quick solution to tackle the sapping indigenous gas conundrum was importing LNG. Former prime minister Shahid Khaqan Abbasi, who in 2013 was the minister for petroleum and natural resources, steered through the “uncharted territory” of LNG and brought it to Pakistan.

Energy expert Vaqar Zakaria, heading Hagler Bailley Pakistan — an Islamabad-based environmental consultancy firm — said it made sense to import LNG then. “We started adding imported LNG to our system about six years ago when this energy source was much cheaper compared to oil, and cleaner too,” he said.

Up until 2019, the LNG import prices ranged from $7-$10 metric million British thermal unit (mmBtu) and even dropped to less than $2/mmBtu in 2020.

Compared to other fuels, the low price provided temporary respite to power producers, said Haneea Isaad, research associate at the Institute for Energy Economics and Financial Analysis. The market and infrastructure for gas was already there, so plugging in foreign gas was not a problem.

It was also the time when oil and coal were being frowned upon due to the greenhouse gas (GhG) emissions by these dirty fuels. On the other hand, gas — also among the fossils family — was considered comparatively cleaner and started enjoying the attention of energy experts. Its popularity grew and along with it, the price tag.

Last year, in December 2021, the government struggled to buy imported LNG at a time of extreme price volatility with single shipments selling for as high as $56/mmBtu.

“It is still cheaper than oil,” insisted Abbasi, adding: “With coal getting a bad rap, and till the world develops renewables, LNG is our best bet,” he argued.

It just may be since the country is quickly running out of local gas.

"Gas is available in big cities to just 23pc people at subsidised rates and its burden is being borne by 78pc people in other parts of the country who rely on LPG, coal and other means," Dawn quoted former information minister, Fawad Chaudhry, as saying in Dec 2021.

The terminals

With the decision to import LNG, Pakistan needed a place to land, transfer and transport the gas to the pipeline and thus the construction of the first terminal began in 2014.

Today, Pakistan has two LNG terminals. The first was commissioned in 2015 and is onshore — the Engro Elengy Terminal Private Limited (EETL) — and the offshore one, the PGP Consortium Limited (PGPC) owned by the Pakistan GasPort Consortium Limited (PGPCL), was commissioned in 2018 at Chan Wado creek.

The government had bought some time and everyone took a big sigh of relief.

More terminals?

The TAPI and the Iranian pipeline never came through while the population continued to grow and industries expanded and the country continued to suffer due to gas shortages.

“We need more terminals,” said Sheikh Imran ul Haque, the former managing director of Pakistan State Oil, “because we need more gas.” But more than terminals, he emphasised, Pakistan needs storages, “either onshore or the floating kind”.

“Building them quickly would be a prudent strategy and will also require confidence-building in parallel to evolving a conducive project structure if not built in the public sector,” he added.

According to Nasir Pervez Gill, general manager of the PGPCL, “there are plans of setting up three more terminals”. One is being constructed by the PGPCL itself, adjacent to its existing terminal and the remaining two will be located on the eastern bank of Chan Wado creek on the opposite side.

The PGPCL aims to expand its footprint in the LNG industry. “The government wants to encourage the setting up of new terminals on a merchant model,” said the PGPCL spokesperson. The second PGPCL terminal, he said, was ready to be built, and awaiting final government approvals. This terminal will operate entirely in the private sector with no government throughput guarantees.

In addition to new terminals, Haque said Pakistan also needed pipeline capacity for the delivery of Re-Gasified Liquefied Natural Gas (RLNG) to Punjab.

Dilly dallying

Clearly there has been inordinate delay from the government's side.

The first terminal was commissioned nine years after the approval of the LNG policy. Haque predicted the third will “again take nine or 10 years". The reasons for the delay, he said, ranged from political narrative, merchant terminal approach and recent plans to build them in the public sector despite knowing the “growing appetite for gas and uncertainty with TAPI and IP pipelines”.

To come out of the energy quagmire requires “detailed generation planning based on the country’s past weather pattern and electricity demand which will then lead to fuel requirement planning”.

“I don’t blame those in the government for not signing on these projects; everyone is scared of taking any decisions. Those who did in the past continue to be held answerable for even the smallest of decisions they took,” said Abbasi, referring to the National Accountability Bureau — the country's anti-corruption watchdog — of manhandling businessmen and government officials alike. He himself was “hounded” by the accountability courts for 22 years — of which eight were for setting up the LNG terminals — and spent nine months in jail.

Endorsing Abbasi, Haque said no one wants to “sign on the dotted line for fear of being hounded by the NAB later”. He, himself, has been in the dock since 2017 for “for conniving with everyone”, including the ministry of energy, the SSGC, the PQA, the defence ministry and of course the OGRA, to build a terminal [EETL] at an exorbitant capacity rate.

“What was there for me?” he wondered aloud, adding that why would he do something to benefit a company that was not even his.

For now, the two up and running terminals have a combined capacity to unload approximately 9 mtpa of LNG. “The government is making arrangements to unload LNG every every 10 days at the PGPCL,” said Gill.

With a capacity of 750 mmcfd, of which 600 mmcfd is contracted to the government, he said the government was utilising 65pc — based on a four-year average — of PGPCL’s contracted capacity. The remaining 150 mmcfd has remained unutilised since the commissioning of the terminal. “OGRA is finalising rules and regulations for the GasPort terminal to follow an open-access model and have multiple users,” assured the PGPCL spokesperson.

On the other hand, the EETL, considered one of the most utilised regasification terminals in the world, is working at over 97pc capacity.

“EETL’s operations are not impacted by day-to-day fluctuations in the LNG market because the terminal solely handles cargos for SSGC which are imported under Pakistan’s 15-year long-term contract with Qatar and are not subject to supply risks that arise in the spot [short-term] market. Cargos under this contract ensure significant supply security as they are also government to government contracts,” explained the EETL chief executive officer, Yusuf Siddiqui.

While the new terminals come up, the government can, in the meantime, sign contracts for two additional ships at each terminal, suggested Abbasi.

“Pakistan needs to go out to the market and sign long term LNG contracts for at least three to five ships a month to completely utilise the contracted 12 ships-a-month capacity at the two terminals,” said Abbasi, as these contracts are still “available at reasonable rates”.

It can also allow the private sector to pay and use the terminals to import two ships each. But he said, the government was “reluctant to let the private sector in and let go of its hold on the gas sector.”

Zakaria, agreeing with Abbasi, said the energy sector needed to be extricated from the clutches of the government to make it viable. “Let the private sector take over and operate LNG terminals and sell the gas to willing buyers; let them take the market risks,” he said.

According to Zakaria, in the short term, if the government as the sole buyer and seller is out of the picture and gas producers and importers and the buyers [industry] can negotiate directly on their own terms, the prices will be cheaper for both. “The state will have enough domestic gas to continue supplying to the poor, at affordable rates,” he added.

He said one of the hard lessons learnt from independent power producers is that the state must “stop giving long-term capacity guarantees to suppliers”.

“It starts a whole chain of corrupt practice — of keeping a markup, money changing hands among a few, levying of taxes by the government — by allowing procurement of expensive fuel and power by state agencies which it can ill afford now,” explained Zakaria.

Fugitive emissions

Although termed the ‘cleanest’ fossil fuel, releasing about half the carbon dioxide (CO2) of coal per unit of power, research on methane — the main component of natural gas — and greenhouse gas emissions across the cradle-to-grave process of natural gas is scrappy and not accurately quantified yet by scientists globally.

But environmentalists warn that methane has 80 times more heat-trapping capacity than CO2, over a 20-year period. The production and transportation of natural gas can emit significant volumes of methane and other greenhouse gases.

The proponents of LNG, however, believe otherwise. “LNG has proven to be better than any other fossil fuel for the environment, as it generates 30pc less carbon dioxide than oil and 45pc less than coal. In the context of the current energy transition happening globally, LNG represents an excellent alternative to reduce greenhouse gas emissions and help combat global warming,” said the EETL’s Siddiqui.

Although it is true that during transportation of LNG, “some gas boils off in the LNG tanks at a permissible rate”, the PGPCL spokesperson explained, this is consumed by the vessel’s engines. “Such percentage is negligible and does not cause environmental hazards as compared to other dirty fuels,” he said.

In addition, he said, LNG transport, unloading, storage and regasification is all carried out in a controlled environment that “does not allow methane to vent in raw form” due to specialised and sophisticated technology currently being used to handle LNG and RLNG. And even when transported into a pipeline, the gas goes “without a single leak”.

But Dawar Butt, an independent analyst on greenhouse gas assessments, who has done CO2 assessments for gas and other fossil fuels for the Centre for Research on Energy and Clean Air (CREA) — an organisation that tracks air pollution levels, trends, health impacts and provides solutions — remained unconvinced. “Leakages are known to happen and pose a risk when the gas is transported upcountry," he said.

The risk of accidents associated with leakages are always there, admitted the PGPCL spokesperson, but assured: “Even those are well taken care of through proper risk identification and mitigation measures taken in advance." However, the PGPCL spokesperson added that “no methane is released during transition from liquid to gas or during transfer to the SSGC pipeline”.

Permission to pollute

Standing on the shore at Rehri Goth, one of the 135 coastal villages located along the 129-km long Karachi coast, one can spot the two terminals amidst giant mangrove clumps.

The Google map shows the distance between the the EETL at Port Qasim on the adjacent Phitti Creek, and Rehri Goth to be 23 km, and it takes a good over one hour, navigating through traffic, to reach the terminal by road from the village. However, the boat ride to Port Qasim is not more than 20 minutes. On a motorboat it can take just five minutes to get to that side, the fishermen say.

For the villagers, the pollution they cannot see or smell, such as methane, poses little danger. But what is of concern to them is the untreated effluent “carrying poison” from the hundreds of chemical and pharmaceutical factories at PQA that finds its way into the sea and the filth from the adjacent Bhains Colony. “That is what is killing our fish,” one of the villagers said.

For Abbasi, however, it is the bigger picture that should be the focus. The reduction in Pakistan’s carbon emissions by using natural gas to replace oil consumption was itself an “environmental success story”, he said.

“The decrease in carbon emissions for 4,200 megawatt power generation on natural gas versus furnace oil is mind boggling,” he insisted.

But with the setting up of the LNG terminals, the passage to hunt has become even more restricted for the fishermen as they are barred from entering the sensitive, high security zone. Not only that, they are often talked to rudely by the security personnel in the patrolling boats, are censured, humiliated and harassed if they are not carrying their CNICs. “They make us squat to become murgha,” said one of the younger fishermen, who experienced the ordeal a month ago.

Mangroves — greenwashing

The villagers in Rehri Goth do not understand that if the ships are coming loaded with gas, why has it not brought any relief to them. They say they are experiencing even more gas shortage than in previous years. “Two hours of gas load shedding alternating with an hour of supply” daily, they say. The shortage has resulted in the villagers buying and using firewood — mostly mangrove, a tree species, officially declared ‘protected’ in 2010. But it is not just the villagers who are plundering the forests in the absence of other alternatives.

The IUCN reported that the construction phase of EETL resulted in the uprooting of 50 hectares of the coastal mangrove ecosystem into reclaimed industrial land.

“Since the Sindh Forest Department (SFD) is the custodian of protected forests, the valuation and no objection certificate can only be issued by it,” said Riaz Waga, chief conservator for forest mangroves and rangelands at the Sindh Forest Department. He added that neither the EETL nor the PGPCL had sought permission from his department.

For each hectare of mature mangroves, the environmental valuation can go up to planting and protection of 500 hectares till its maturity, he said.

“Nothing in life comes for free,” said Abbasi, referring to the ruthless destruction of this precious marine forest, adding: “One attempts to mitigate any impact that is caused.”

To compensate for the loss of mangrove cover, the EETL claims to have planted mangroves over 500 hectares of land surrounding the affected area.

Meanwhile, the PGPCL terminal uprooted 2,400 mangrove species of Avicenna Marina and Rhizophora “for laying the connecting gas pipe line”, said the terminal spokesperson. But, he added, since 2018, the company has planted 40,000 mangrove saplings of both species over 25 hectares at its terminal and the FOTCO oil terminal, “which is in excess to SEPA’s requirement”.

“Mangroves grow to a maximum height of up to five meters and start to mature in just three years when they start giving seeds and reach full maturity in five years,” said Gill. A majority of the mangroves, he said, planted by his company, have gained a height of “nearly two meters” and have “started the self-pollination process” to propagate naturally.

“The mangroves grown by both the companies are doing well,” said senior environmentalist, Saquib Ejaz Hussain, heading EHS Services — a consultancy firm working in the field of energy, environment and social safeguards compliance — who remained involved in the environmental and social impact assessments for EETL and the upcoming new ones like Tabeer, LNG Easy and Energas.

Along with the trees that were uprooted, there were others that were buried alive, said the fishermen at Rehri Goth, referring to the dredging that had to take place to make way for LNG ships to enter the channel.

“Dredging was carried out at the berthing basin of the PGPCL terminal in Chan Wado creek to achieve the “required design depth of 13.5 meters for berthing of LNG carriers, being the requirement of PQA”, said the terminal spokesperson. “Up to 2.2 million cubic meters of sea bed soil was removed, he said, adding that it was “dumped responsibly about 4 km away from the terminal” in keeping with PQA instructions.

“Much of the dug up soil was dumped atop the mangroves which throttled them and they died like you would if someone buried you alive,” pointed out 70-something Haji Ali Qasim, a semi-retired fisherman. The trees that died were so many, he said, “we still use the branches of the dead wood”.

Dismissing the fishermen's claims that the dredged soil was dumped over mangroves, the PGPCL spokesperson explained that the dredged material was deposited at a PQA designated dumping location, via a pipeline. “The cofferdam constructed was also in keeping with international best practices. "It is nearly 3.5km from the PGPCL berthing basin and was earmarked by the PQA,” explained Gill.

Renewables to elbow out LNG

The Russian invasion of Ukraine may just have started a quest for cleaner fuel, developing batteries and energy efficiency. And if there is one lesson to be learned from the war between Ukraine and Russia, for Pakistan, it is to clean up its energy act and leapfrog towards solar and wind energy, both of which Pakistan has in plentiful supply, and lower its dependence on imported fossil fuel. It is also in Pakistan’s energy plan.

According to the National Electric Power Regulatory Authority’s IGCEP 2021-2030, the “RLNG based plants, though installed and available, are envisaged to have a decreasing share in the energy mix from 2021 to 2030 i.e. from 19pc to 1pc in 2025 and then eventually falling to nearly 0pc in 2030.”

Although gas and petroleum prices were soaring even before the Russian invasion, there was a surge in the demand for fossil fuels after the lull during the Covid-19 pandemic. Barely two weeks into the war, there emerged a crisis on both the price and supply fronts, with both going awry after rhetoric from Europe and Russia on cutting Russian gas (although Europe depends on 40pc Russian-sourced gas).

With world leaders today seeing Putin as a threat to both world security and to its environment, the EU, for example, has picked up pace to install wind turbines, solar panels and heat pumps faster than ever before; Germany, which had committed to decarbonise its electricity supply by 2035, is now fast-tracking building two LNG gas terminals to replenish gas from other suppliers in case Russia blocks its supplies, and is re-engaging with Qatar on a long-term LNG contract.

Pay a hefty price or go without gas

And yet the paradox in Pakistan of going after LNG infrastructure. While it aims at eliminating imported coal and reducing its share of imported petroleum from its energy mix, it has been scrambling to buy imported LNG — a bridging fuel as Pakistan moves towards cleaner energy — and thus its aim to build more terminals as well as a new pipeline — with help from Russia — for this new fuel.

“I don’t see the pipeline happening, Ukraine or no Ukraine,” said Zakaria, adding: “The war has only made it worse as the optics of Pakistan-Russia assistance for a large project will not look good,” he said.

That is why, say experts like Isaad, it is still not too late for Pakistan to take the money out of LNG and invest in climate-friendly renewables and prove it is serious in pursuing its goal of achieving a 60pc share of renewables in the energy mix by 2030. “Building an entire infrastructure on a transition fuel it may have to abandon in a decade or so may not be a smart move,” she said.

An even bigger problem, said Zakaria, is that “we will just not have the cash to afford LNG”. With the demand from the residential sector growing in winter and declining internal production of gas, there just won’t be enough low cost gas for the industry to use, he said.

Further, he warned, the government has decided in principle to go for the weighted average cost of gas (Wacog) for pricing gas in the country. This means mixing prices of indigenous and imported gas to create a level playing field for LNG imports.

“If this happens, residential consumers can expect another increase in the price of gas,” he said. “Be prepared to see switch to heating water using electricity, supplied by the new power generation capacity which will largely be based on hydro, coal, nuclear and renewables.” He has already installed a back-up electric stove for cooking in his home as he has solar power available.

But EETL’s Siddiqui insisted that globally, renewables continue to play a minor role in today’s energy environment because they are challenging and expensive to store and transport. Till those challenges are overcome, LNG will continue to play a big role in Pakistan’s energy mix, he said and therefore, “investing in LNG infrastructure makes sense because there is huge gas demand potential for the next 20 years, especially in Asia where it is to grow by 3pc”, referring to the Shell LNG Outlook 2021.

Reaching energy security

According to Haque, with just a handful of energy sources to play with presently, solutions and decisions are not unique to Pakistan alone and neither can one predict the future. “But yes, we can ensure process to reduce the deviation”. For this, however, he added, the decisions by planners “who have the knowledge and the ability to think out of the box”, need to be fully supported.

For Zakaria, though the best bet would be to create an energy market for the industry sector (at a slightly higher or non-subsidised rate) while providing energy protection, through cheaper hydel and natural domestic gas, for the poor and the vulnerable. Endorsing Zakaria, Haque said: Pakistan needs to ease doing of business and also achieve “lowest cost of generation for our industry and consumers and focused subsidy for those who cannot afford”.

“Incentivising the industry is necessary but without burdening the balance sheet of state-owned enterprises,” said Haque. Instead, he said, difficult decisions were necessary “to reduce circular debt” by ensuring that all users pay the “actual cost of fuel and electricity”.

This, in turn, will ensure and encourage conservation. “When gas starts to be looked upon as a precious commodity, users will themselves volunteer to conserve it." He suggested setting standard rates and different packages — something like cellular companies have done. “The consumers choose and pay for whichever package suits them best,” he said.

To Haque, the country may do well if the indigenous gas is used only for “value-added industries” or the fertiliser and petrochemical ones. He was also not in favour of expansion of electric and gas networks to uneconomical areas and, instead, suggested “looking into off grid solutions”.

But, pointed out APTMA’s chairperson, Shahid Sattar, it was not possible for modern textile machines to run on electricity from the grid due to variations, stoppages and jerks in the electricity which happens several times in a day and these machines shut off automatically. “For our merchandise we need them to run continuously, both for quantity and quality,” he explained, giving an example of the microchip in these machines. “The controller card is so sensitive, it simply burns down with electricity variation and cannot be repaired in Pakistan which means replacing it altogether”.

The EETL’s Siddiqui emphasised the same: “Pakistan’s industrial and power sectors cannot make process changes overnight to shift to another fossil fuel or renewable energy sources. With depleting indigenous gas production, reducing reliance on oil and coal due to environmental factors and non-availability of enough renewable energy sources, LNG is one of the most important fuels that would play a key role in Pakistan’s market for next 15-20 years.”

Another solution, pointed out Haque, was for the government to “ensure and expeditiously give access to its transmission network of electricity, gas and oil (where applicable) pipelines; remove barriers to undertake business in the energy sector, let players compete in the market and OGRA, NEPRA and Council of Common Interests all or one of these regulates.”

The textile industry, said Sattar, was willing to produce cheaper electricity from hydel, thermal and solar but it cannot be supplied privately on business to business as “wheeling rates are irrational” according to NEPRA’s power plan. “The government is bent on shutting us down and not willing to meet us even half way,” said the APTMA spokesperson.

Others in the industry, worried about shutting down, whisper they may take their business out of the country where they can get uninterrupted power supply.

Header image: An aerial image of the Engro Elengy Terminal Private Limited. — Photo courtesy: EETL

This write-up was supported by Policy Research Institute for Equitable Development (PRIED) — a think-tank based in Islamabad.