LNG: the game changer

By Malik Muhammad Ashraf

26Nov. 2017

The News

Prime Minister Shahid Khaqan Abbasi as minister for petroleum was instrumental to
the adoption of the policy for import of LNG as one of the options to tide over the
energy crisis and himself inked an agreement with the government of Qatar in
February 2016 for the import of 3.75 million tons of LNG per year for a period of 15
years. Now he has inaugurated the second LNG terminal at Port Qasim.

Pakistan is importing 600 million cubic feet of LNG through its first terminal and,
with the second terminal becoming operational, the total volume of LNG import per
day will increase to 1.2 billion. It is pertinent to point out that both these terminals
have been built by consortiums from the private sector. More terminals are also likely
to be added in the near future since investors are evincing tremendous interest in their
construction in view of the burgeoning demand of LNG in Pakistan, which the prime
minister has said would ultimately be in the vicinity of 30 million tons per annum.

The significance of the LNG deal for an energy deficient country like Pakistan can
hardly be over-emphasised. The most significant aspect of the deal was that the agreed
price of $5.35 per MMBTu was quite below the agreed price of $5.90 per MMBTu
and $ 5.70 MMBTu in case of Tapi and the Pak-Iran Gas pipeline respectively.

Energy is regarded as the life-line of a nation and an engine of development. It also

helps ensure the comforts of the modern life for the masses, made possible by the
emergence of new technologies. The sustained economic development of an energy-
starved country is inconceivable. Attaining energy security, therefore, is vital for
development and change in any country.
It is indeed unfortunate that Pakistan being a surplus power producing country in 1997
became an energy-starved entity simply because of the criminal negligence of
successive governments in the last 15 years to increase the avenues of energy
production in line with the existing and future needs of the country. It is also mind-
boggling to note that they could not foresee or perceive the increasing energy crisis.

The PML-N government inherited an economy which was in ruin, and a county that
was in the grip of a very severe energy crisis. However, it is satisfying to note that the
PML-N government has exhibited unflinching commitment to tide over the energy
crisis and has made discernible and productive efforts to winch the country out of this
debilitating situation.

The importance of the LNG import agreement can be better understood by taking a
look at the ground realities in the power generation sector in Pakistan. At the moment,
more than 50 percent of the total energy mix of Pakistan including hydel power, fossil
fuel, nuclear and renewable, is based on natural gas. Pakistan’s constrained demand
for natural gas is 6000 MMFCD against a supply of 4000 MMFCD and the
unconstrained demand for natural gas is estimated to be 8000 MMFCD.

Over the last ten years, production of gas in Pakistan has remained stagnant at 4000
MMFCD and new gas discoveries have barely kept pace with natural depletion of
existing gas fields. In view of the difficulties in completing trans-regional gas pipeline
projects like Tapi and IP, import of LNG was the only solution to the country’s energy
needs till such time as there is a substantial change in the energy production mix and a
shift towards renewable energy resources.

LNG imports from Qatar reportedly are meeting 20 percent gas requirements of the
country. In terms of impact, it is estimated that it would help in the generation of 2000
MW of electricity at a much cheaper rate; it has already revitalised the fertilizer and
other industries, almost eliminated gas loadshedding for domestic consumers and
revived the fortunes of the CNG industry which almost faced extinction before the
current government took over. It would be pertinent to mention that in view of the
shortage of gas, the previous government even mulled over the option of shutting
down the CNG sector.

At present, re-gasified LNG is being distributed through the existing distribution

networks of SSGPL and SNGPL but in the long term a separate network will be
constructed since the existing network cannot cope with the increased demand for gas.
An agreement with Russia has been signed for the construction of a gas pipeline
between Lahore and Karachi costing $2 billion. The government has also completed
90 percent work on the construction of another pipeline from Karachi to Lahore which
hopefully will become operational in the near future.

LNG is thus poised to play a role of game changer as far as production of power and
running the industries is concerned. The decision to import LNG was not only timely
but a visionary step, notwithstanding the cynical attitude of detractors of the
government.

The government is also striving to surmount the energy crisis through other sources
apart from import of gas for re-energising the closed power producing units and
setting up new power generation units. Under CPEC, power producing projects with
an accumulated power generation capacity of 10,640 MW will be completed by 2017-
18. Another 6645 MWs of early harvest projects in the energy sector are also on the
actively promoted list.

The commitment and dedication with which the government has focused on ending
energy shortages in the country is beyond reproach. The hallmark of the government
strategy regarding power generation has been more emphasis on renewable energy
resources and increasing their contribution in the energy production mix. Setting up
projects based on indigenous coal to produce electricity, conversion of existing plants
to coal-based entities and reliance on solar and wind energy are some of the steps that
have been taken.
All this will surely reduce production costs and the provision of electricity to domestic
and industrial consumers on cheaper rates than at present. The country is fast moving
towards energy security, which is an essential ingredient of socio-economic progress.

The writer is a freelance contributor. Email: ashpak10@gmail.com