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Pakistan fast-track FSRU receives breakthrough endorsement

06 Mar 2014 18:03:00 | glm

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Pakistani state officials from the Economic Coordination Committee (ECC) have endorsed a fast-track LNG import project with a target start up date in the first quarter of 2015 in the Port of Qasim.

The project is led by Karachi-based petrochemical conglomerate Engro, which has teamed up with US floating storage and regasification unit (FSRU) provider Excelerate Energy.

It still requires Pakistan’s prime minster to sign the endorsed LNG Services Agreement (LSA) but construction of a new jetty in Qasim is set to start this month, according to Engro CEO Imran Ul Haque.

“The first gas date is 335 days from signing of [the] LSA,” Ul Haque said.

During the first year of operation the terminal would have capacity to regasify 200 million cubic feet (mcf)/day, or 2.1 billion cubic metres/year. From the second year this will be expanded to 400mcf/day, equivalent to 2.9mtpa.

Pakistan State Oil (PSO) is expected to buy 2mtpa from Qatargas under a 15-year deal after new political leaders in Pakistan and Qatar reinforced an intergovernmental agreement at a meeting last year.

PSO is expected to tender the balance of 1mtpa on a short or mid-term basis. The goal of this would be to achieve some LNG price index diversification, Ul Haque implied.

State-owned regional gas distributor Sui Southern Gas Company (SSGC) has a take-or-pay arrangement at the proposed terminal and is expected to sell regasified LNG to the power sector with the LNG price weight averaged with the indigenous gas price.

The distributor will pay a tolling fee of $0.66/MMBtu to Engro’s wholly owned Elengy Terminal Pakistan subsidiary which will operate the terminal. The breakdown of the toll consists of capacity fees and utilisation fees. A capacity fee of $272,479/day during year one will decrease to $228,016/day when capacity is doubled in year two until the end of the contract in year 15.

The utilisation fee will stay constant at $0.063/MMBtu across the period, according to a statement from SSGC. Engro has said its tolling structure is among the most competitive across the Asian and Middle East region (see GLM 14 November 2013).

Pakistan’s industrial sector has suffered from chronic gas shortages recently as domestic production has not kept up with demand. Some estimates put the shortage at 2 billion cubic feet/day – or 56.6 million cubic metres (mcm)/day – and forecast it to double in the coming years.

The scale of Pakistan’s gas demand has warranted a number of LNG projects. The newly-appointed government last year gave a green-light for three projects (see GLM 25 July 2013).

 

Timeline for next project wave

Aside from Engro’s fast-track project, SSGC and private terminal developer 4GasAsia were also given mandates to develop import infrastructure. The SSGC project was initially conceived as a mid-scale retrofit of an existing LPG facility, although it is now being developed as a greenfield project. As the larger 4GasAsia project is also understood to have changed in scope, there are some expectations that the government will launch a tender for the next terminal by either year end or early next year.

Both projects appear to be at preliminary stages in their development with various feasibility studies yet to be conducted.

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