KARACHI: Pakistan’s Energas is all set to start construction of Pakistan’s third Liquefied Natural Gas (LNG) terminal at a cost of $180 million after securing almost all regulatory approvals, the company’s chief executive officer said.
Energas was formed in 2017 as a buyers’ consortium to set up the country’s first and largest private LNG terminal. The project intends to provide LNG for associated businesses through a floating storage and regasification unit (FSRU).
“We are ready to start construction activity at the site for LNG terminal soon,” Energas CEO Anser Ahmed Khan said in an interview with Arab News this week.
Energas was granted a license to undertake regulated activity related to the sale of natural gas and regasified liquefied natural gas (RLNG) in Pakistan on January 12, 2021. The last steps now include getting an LNG terminal construction development license from the Oil and Gas Regulatory Authority and signing gas transportation agreements with two gas utilities, the Sui Southern Gas Company (SSGC) and Sui Northern Gas Pipeline Limited (SNGPL).
“We hope that the OGRA license will be granted by next month,” CEO Khan said.
With Pakistan becoming one of the fastest growing LNG markets since it first started importing in 2015, with imports rising to 8.4 million tons in 2019 from 6.8 million mt in 2018, analysts say there is an urgent need to speed up import capacity expansions, which have been planned to absorb incremental inflows.
S&P Global Platts Analytics forecasts LNG imports to rise to 9.3 million mt in 2021, if Pakistan can bring in another floating storage and regasification unit relatively quickly. Imports are expected to exceed 17 million mt by 2025.
The Energas LNG terminal will be constructed at Port Qasim in Karachi, with a capacity of 750 million cubic feet per day (mmcfd) to 1000 mmcfd, and is designed to accommodate a floating storage and regasification unit of approximately 170,000m3.
“The construction of the terminal would take 12 to 15 months to complete,” Khan, who previously worked as vice president for LNG at EDF Trading London, one of the largest utilities in the world, said, adding: “We initially plan to import two cargos per month.”
Energy-deficit Pakistan has only two LNG terminals operating at present, with a combined annual capacity of 1380 mmcfd. The capacity of both terminals has been contracted by the government. A fourth terminal, Tabeer Energy, is expected to start operations in the first quarter of 2023.
The country is currently suffering severe gas shortage, forcing many industrial units and power plants to look for alternates or halt operational activities.
“When we will go online with commercial activities, the efficiency of the country in terms of capacity would increase by 50 percent and the LNG value chain will get the required breathing space as it is currently on fragile footing due to limited storage and maximum capacity utilization,” Energas CEO said.
“We will directly buy LNG from producers and supply to our buyers’ consortium, comprising some of the largest business groups,” he said, adding: “When you have a consortium of customers running the chain, the risks associated with long-term LNG purchases are well spread and better managed.”
Natural Gas constitutes around 50% of Pakistan’s primary energy mix. The local production of gas is stagnant at 4 bmcfd for almost 10 years as compared to the constrained demand of 6 bmcfd and unconstrained demand of 8 bmcfd.
The Energas chief estimated that the demand for gas would continue to grow by 100-200 mmcfd per year which he said could only be “managed with greater involvement of the private sector.”
Spot LNG prices on Wednesday surged to a record high of $32.50 per mmbtu, according to S&P Global Platts, the price agency which issues Japan-Korea-Marker (JKM), a reference point used for spot deals in the region.
Last week Dubai’s state-owned Emirates National Oil Company Limited (ENOC) declined to deliver a liquified natural gas shipment to Pakistan for the end of February amid rising prices in the international market, as gas shortages continued to soar nationwide.