Team off to Qatar for LNG import, Iran for IP pipeline

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ISLAMABAD – A high-level Pakistani delegation led by Petroleum Minister is leaving for Qatar and Iran to discuss import of LNG as well as IP gas pipeline in a renewed attempt to pursue the multi-billion dollars gas projects on fast track basis. Official sources told The Nation that a delegation led by federal minister for petroleum & natural resources Shahid Khaqan Abbasi, comprising Secretary Petroleum Abid Saeed and Inter State Gas Systems (Private) Limited (ISGS) managing director (MD) Mubeen Sulat along with other officials are scheduled to visit brethren countries in a bid to materialise import of much needed gas to the country. They said the delegation is going to Qatar to hold talks for LNG import at affordable prices, keeping in view the international prices of LNG. They also said that the delegation would visit Qatar in first phase on Saturday (today) to materialise the import of Liquefied Natural Gas (LNG) and on Sunday it will move to Iran to restart negotiations on Iran-Pakistan gas pipelines project on certain issue and will come back to Pakistan on 9th December.
Earlier, Qatar while refusing to construct LNG terminal at port city of Karachi had expressed a friendly gesture of agreement pertain to supply of 500mcfd Liquefied Natural Gas (LNG) to Pakistan to resolve energy issue. Besides the demand of sovereign guarantee from the government of Pakistan and inclusion of Asian Development Bank (ADB) in some components of the deal, Qatar had also asked Pakistan that construction of LNG terminal would be Pakistan’s responsibility.
At present, Sui Southern Gas Company Limited has cleared the retrofitting of LPG terminal for import of LNG and also approved the service-tolling contract to Engro Vopak Terminal Limited (EVTL) with certain conditions. After the approval of $2 billion service tolling contract to Engro Vopak Terminal Limited (EVTL) for the import of LNG, the government has swung into action to ensure LNG supply by Qatar. Pakistan wants to ensure the first flow of LNG import by November 2014.
Retrofitting refers to the addition of new technology or features to older systems. For example power plant’s retrofit improving power plant efficiency/ increasing output/ reducing emissions. Principally retrofitting describes the measures taken in the manufacturing industry to allow new or updated parts to be fitted to old or outdated assemblies (like blades to wind turbines).
So far, the cost of LNG has been worked out with Qatar at $19.49 per MMBTU and the price differential will cost the country $326 million extra in the first year alone. While, under the preliminary working as per official sources the “LNG will be sourced from Qatar at a price equivalent to 14.9 per cent of Brent, which will translate to a RLNG (re-gasified liquefied natural gas) price of (110×14.9 per cent [today’s Brent price] = 16.39+0.60 [marine transport] +2.50 [terminal tolling charge) = $19.49/MMBTU. At present, the price of the commodity is significantly higher than the price obtained in the recently cancelled tender, which works out to $17.26/MMBTU. The price differential is expected to cost the country at $326 million extra in first single year.”
A senior official at petroleum ministry told that Qatar had already asked the government of Pakistan to ink a deal with US-based ConocoPhillips Company (CPC), which had linked the provision of LNG to Islamabad only after the incumbent government would ensure guarantee for its investment besides other conditions. ConocoPhillips Company (CPC) enjoys the rights in Qatar to export LNG on the directives of Qatari government. Certain issues with regard to import of Qatari LNG to Pakistan have already been settled with the US firm during energy talks held in the US this year. Qatari LNG is primarily for the powerhouses in Pakistan to generate 2,500-megawatt electricity. He also told that energy starved Pakistan wants to ensure the first flow of LNG import by November 2014 while EVTL terminal would first import 200 mmcfd LNG and then 400 mmcfd. More terminals would also be installed for more LNG import, as the government wants to import 2 bcfd LNG in two years’ time, they added.
The sources also told that the delegation would visit Iran on Sunday and will come back to Pakistan on 8th December 2013 after having discussions with Iranian counterpart to materialise the IP gasline project. They also told that the Pakistani delegation would talk on gas pricing, extension in the deadline, financing for laying gasline inside Pakistan among many other trivial issues during their upcoming scheduled visit to Iran.
Following the deal between Iran and world powers, it is believed that sanctions would be relaxed and Pakistan would be able to bridge the widening power demand supply gap. Pakistan has already told the US that both Pakistan and Iran had signed gas sale price agreement (GSPA). And, Iranian gas is necessary for Pakistan to meet the energy demands of the country. Similarly, Prime Minister Nawaz Sharif clearly conveyed to the US secretary of state John Kerry when he visited Pakistan in August that his government would go ahead with the project. He told Kerry that the project was imperative for Pakistan’s economic development given the acute energy shortage in the country. A detailed non-paper stating Pakistan’s position on the matter was also handed to the secretary of state for the Obama Administration.
Under the IP gasline project, 21.5 million cubic meters (mcm) per day of Iranian natural gas would be exported to Pakistan for up to 5,000 megawatts of electricity generation in order to relieve electricity shortages in Pakistan. The PML-N government has repeatedly dispelled the impression that it might abandon the $1.5 billion project due to pressure from the US, Saudi Arabia and some other oil-rich states.
On March 11, Iran’s President Mahmoud Ahmadinejad and his Pakistani counterpart Asif Ali Zardari inaugurated the final construction phase of the gas pipeline, which is to carry natural gas from Iran to its eastern neighbour. The joint multi-billion-dollar pipeline is designed to help Pakistan overcome its growing energy needs at a time when the country of over 180 million people is grappling with serious energy shortages. Pakistan with depleting gas reserve and suffering from endemic gas shortfall urgently needs to improve the efficiency of its power plants. The increase in efficiency will lead to more production of electricity as in the baseline with same quantity of gas, which will also reduce overall CO2 emissions.