KARACHI: Special Assistant to the Prime Minister on Power and Petroleum Tabish Gauhar has expressed the hope that the two new “merchant” LNG terminal developers will soon achieve financial close and start construction this year.

In a recent letter to Energy Minister Hammad Azhar, Mr Gauhar said the country needed at least one additional LNG import terminal without any take-or-pay commitment by 2023.

With two terminals at Port Qasim, Pakistan currently has an LNG storage capacity of about 320,000 metric-cubes. Although Pakistan is one of the top seven LNG importers, it ranks as low as 18th in terms of storage capacity.

“There’s a dire need for doubling our capacity. I think we need at least two more LNG terminals,” said Anser Khan, CEO of Energas LNG Terminal, one of the two upcoming projects that Mr Gauhar referred to in his letter.

Developers seek allocation of 300-400 million cubic feet per day of pipeline capacity

The new terminal developers have requested the government to allocate a minimum of 300-400 million cubic feet per day (mmcfd) of pipeline capacity to each of them to ensure that they take a final investment decision.

“As a new terminal developer, we’re ready to take the risk despite the fact that we’ll have access to only 50-60 per cent of our total pipeline capacity needs. If we’re given that, we can start developing the project,” said Mr Khan whose terminal will have 1,000 mmcfd capacity. He intends to keep his base load at 580-600 mmcfd as the remaining capacity will be used on a peaking/spot basis.

The existing two terminals operate at 85pc or higher capacity throughout the year because of massive demand. In other words, the country is using the existing two floating storage and re-gasification units (FSRUs) only as re-gasification units: the system relies heavily on the gas line-pack, which is the volume that can be stored in a pipeline for scheduling purposes.

As a result, it leaves the system with zero room for contingencies and also increases its reliance on the spot market. No wonder PSO and Pakistan LNG Ltd, public-sector LNG buyers, often find themselves at the mercy of the spot market volatility. “Unless there’s additional investment in LNG infrastructure, not only will we keep facing shortages, but our reliance on spot volatility will also increase,” he said.

One of the existing terminal operators has shown interest in developing an onshore LNG import facility at Port Qasim, although the project is contingent upon the completion of the North-South Gas Pipeline. Unlike an FSRU that has plug-and-play advantages, an onshore terminal is scalable and offers the benefits of economies of scale to the consumer.

“During my professional career in Europe, my parent company set up an onshore terminal that cost approximately $2 billion with significant running costs. I’d suspect it may be difficult to set up an onshore terminal in Pakistan until and unless you underpin that with a take-or-pay contract,” said the Energas CEO, noting that the upcoming two players are willing to develop terminals without any take-or-pay risk to the government.

“With access to limited resources, it may be prudent for the government to focus on the pipeline infrastructure and let the market take its own course on the LNG terminal development,” he added.

In his letter, Mr Gauhar also referred to the possible use of cryogenic road tankers to supply up to 300 mmcfd to industrial customers in and around Karachi without the need to physically access the Sui pipeline network.

However, the idea of using bowsers to supply imported LNG to its customers doesn’t appeal to Mr Khan. “We want to use the pipeline network and avoid bowsers as they’re inefficient. For example, a typical LNG tanker has 70,000 tonnes of LNG, but one bowser can carry up to 20 tonnes only,” he said.

Published in Dawn, August 7th, 2021