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PAKISTAN: LNG IMPORT FORM QATAR CONTENTS

1. Energy Crisis In Pakistan 2. CNG Basic Facts 3. Pakistan’s LNG Policy 2011 4. Qatar LNG Producing Capability 5. Pakistan Qatar LNG Project 6. Foreign Investment In Pakistan 7. Global LNG Developments In 2011key Points 8. Conclusion 9. References

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The government plans to generate 7880 MW electricity by 2011 out of it 4860 MW is to be generated by firing natural gas. Pakistan energy sector comprises of major sources with share of 50. and particularly the storage capacity of Mangla.1. Pakistan had 28 trillion cubic feet reserves of natural gas in 2006 but due to increase in its demand it is expected to be exhausted in next two decades. There is an expected short fall up to 50% because of increase in demand and supply gas up to 3. Terbela and Chashma Dams will be reduced due to mud deposits. It will affect agricultural. These reserves are still untouched due to lack of technique in coal mining. This would affect the national exchequer heavily. Pakistan’s total energy requirement would increase by 48% to 80 million tons of oil equivalent in 2011. to produce cheap electricity. This would delay the Economy of Pakistan (which is already in complexity). and coal 7. Pakistan has a total hydro potential of 40. hydro electricity 11%. followed by oil 29%.000 MW. The major shortfall is expected in natural gas supplies. If the dams are not built there would be short fall of 40 million acre feet of water by the year 2006 and 108 million acre feet by 2013. Qatar is the largest LNG producer in the world and it can provide LNG to Pakistan on urgent basis. LNG BASIC FACTS Page 2 of 11 . Pakistan has world’s seven largest reserves of coal after discovery of THAR. 2. The high cost of the import of Oil. Similarly subsidies of billions of rupees have to be doped out “Water and Power Development Authority (WAPDA)” to bear loses. BHASHA DAM etc.000 MW against which it generates only 6500 MW. Unfortunately Pakistan has to face a major energy crisis in Natural gas. industry. It should maximize the utilization of hydroelectric resources through building of dams such as KALABAGH DAM.6%. Power and Oil in next two to three years. Construction of Big Dams.It should make effort to fulfill the project with TURKEMANISTAN and AFGHANISTAN gas pipe line which was floated by TURKEMANISTAN in 1991 to meet the demands of gas for Pakistan. Consequently. Pakistan imports energy to overcome the problem and maintain standard of living of people. uncertain regional security environment attached with lack of national agreement to build dams are likely to delay quick resolution of energy crises.4% of gas. Consequently power shortage will be up to 11. LNG (Liquified Natural Gas) import from Qatar is one of the option for Pakistan to meet its urgent energy needs. ENERGY CRISIS IN PAKISTAN Energy is the most important sources for economic growth of a country. Similarly a Sharjah based company initiated and sponsored a gas import project through an offshore pipe line from QATAR TO PAKISTAN IN 1990 but it is still under consideration. This energy deficit will lead to inflation.750 MV per year.

with low concentrations of other hydrocarbons such as ethane. markets. a chemical called Mercaptan (that has sulfur like odor) is added before distribution. which measures the amount of LNG we produce at our facilities each year. liquefying the gas is the preferred option for ease of transportation. non-corrosive and non-toxic liquid and is stored and transported at an atmospheric pressure equivalent to its boiling point. 3) Producing LNG in the liquefaction train The gas then flows into a liquefaction train for processing into LNG. During the first phase of this process impurities in the gas—sulfur compounds. propane and butane. or if it is in gas or liquid form. to give it a distinct unpleasant odor (like rotten eggs). 2) Liquefied for easy transportation For countries where the gas is used in local markets. LNG is an odourless. Most of these additional compounds are removed during the liquefaction process. Natural gas is made up mainly of methane. depending on whether you want to measure LNG’s volume. turbines. odorless and tasteless. When transport through pipelines isn’t possible. 4) How is the gas measured? The natural gas business uses many different measures. This makes it easier to be stored and transported safely and reliably to all corners of the globe. In its liquid state. LNG is reduced to approximately one-six hundredth (1/600th) of its volume compared to the gaseous form.[8] 3. colourless. and Canadian gas to U. carbon dioxide and water—are removed in stages. vessels and interconnecting pipework that liquefies the gas to turn it into LNG. meaning its temperature stays constant as long as it is maintained at a constant pressure.S. Because natural gas is colorless. together with its high-energy efficiency when used to generate power in combined cycle power stations. 5) The clean energy of choice LNG is increasingly becoming the fuel of choice for energy utilities around the world due to its clean-burning qualities and lower CO2 emissions per unit of energy. nitrogen. This serves as a safety device by allowing it to be detected in the atmosphere. PAKISTAN LNG POLICY 2011 Page 3 of 11 . it is technically and economically viable to transport the gas through pipelines. the complex line up of compressors. The main measures we use in this website is (mtpa millions of tones per annum). as is the case in Qatar when main markets are many thousands of kilometres distant. in the event of a leak. its energy content. It also contains water. oxygen and some sulfur compounds. an option that is used to deliver Russian natural gas to European markets. A production “train” is a self-contained processing unit.1) What is LNG? Liquefied Natural Gas (LNG) is natural gas that has been cooled to -161 degrees Centigrade. The remaining gas is primarily methane with only low quantities of other hydrocarbons. carbon dioxide.

Gas shortages have already emerged and shall increase substantially in the following years if indigenous supply is not supplemented through imports. the demand for gas is projected to increase sharply and the country’s recoverable indigenous gas reserves will be insufficient to meet this demand. joint venture or consortium (hereinafter referred to as “LNG Developer”) is responsible for purchasing LNG supplies.According to the LNG Policy 2011 given on the website of the ministry of petroleum and natural resources key points are as following: [9] 1) Introduction Pakistan‟s policy for the sustainable development of the energy sector. Necessary measures are being taken for installation of LNG receiving. storage. With accelerating economic growth. for the distribution and sale of regasified LNG (“RLNG”) in the domestic market. The LNG Policy 2006 has been modified to facilitate expeditious implementation of the LNG Projects. re-gasification facilities and expansion of gas transmission infrastructure. based on economic and strategic considerations. A Government designated buyer. (d) Developing energy infrastructure. strong emphasis is being laid on importing gas from neighbouring gas-producing countries through cross-border gas pipelines and also in the form of liquefied natural gas (“LNG”). including the provision of reliable and competitively-priced energy is based on the following objectives: (a) Optimization of the primary energy mix. gas utility. The LNG Developer would enter into a Gas Sales and Purchase Agreement (GSPA) directly with a Government-designated buyer. any consumer or any LNG supplier (hereinafter referred to as “LNG Buyer(s) would directly import the LNG under a LNG Sale Page 4 of 11 . 2) LNG Import Project Structure An LNG import project may be structured under one of the following alternatives: (a) Integrated project structure. under which a private or public sector party. and (e) Developing human resources with emphasis on energy sector-specific technical skills and expertise Natural gas plays a key role in Pakistan’s energy balance which is currently around 50% of the country’s primary energy supplies. or (b) Unbundled project structure. transporting them to its LNG import terminal (comprising of receiving. (b) Maximizing the utilization of indigenous energy resources. gas utility or any customers (hereinafter referred to as “RLNG Buyer(s)”). In order to address the shortage. under which: i. storage and re-gasification facilities) and supplying RLNG to the domestic market and/or for its own use. (c) Enhancing private sector participation in the energy sector by strengthening the regulatory framework and institutional capacity.

4 trillion cubic metres). the Government will actively assist the LNG Developer or LNG TO/O. (c) Initial Allowance will be admissible at the rate of 50% of the cost of depreciable assets under section 23 of the Income Tax Ordinance. imported by that LNG Developer or LNG TO/O. as the case may be. The Government shall not provide any guarantee for LNG import projects. by expanding the scope of SRO 678(1)/2004. machinery and equipment and parts will also be exempted from withholding tax at import stage as allowed under clause 56(vii) of the part (vi) of the second schedule to the Income Tax Ordinance. to secure long term. Qatar's proven natural gas reserves stood at approximately 896 trillion cubic feet (25. Part of the world's largest non-associated natural gas field.[6] Page 5 of 11 . which spans an area roughly equivalent to Qatar itself. 4. However. LNG supplies to Pakistan. which holds an additional 450 trillion cubic feet (13 trillion cubic metres) of recoverable natural gas reserves. Government support may be considered. LNG TO/O or LNG Buyer as applicable: (a) Zero percent customs duty will be charged on imported LNG. 2001. or a free-onboard (FOB) basis. 2001. The majority of Qatar's natural gas is located in the massive offshore North Field. FBR will issue necessary notification in this regard. or C&F basis. normal deprecation at the rate of 10% will be also allowed on plant and machinery. has identified a suitable site (whether land based or offshore). (d) Exemption from withholding tax on interest payments to foreign lenders will be allowed as permissible under various provisions of the Income Tax Ordinance. (b) Exemption from custom duty in excess of 5% with total exemption from sales tax in respect of plant.and Purchase Agreement (“SPA”) either on a delivered ex ship (DES) basis. as the case may be. in obtaining land and port facilities for an LNG terminal at a reasonable cost and within a reasonable time frame. if needed. as the case may be. that is almost 14% of all known natural gas reserves and the thirdlargest in the world behind Russia and Iran. 2001. the North Field is a geological extension of Iran's South Pars field. In addition. (e) Sales tax and Federal excise duty will be charged on import and supply of LNG at applicable rates. 3) Government Incentives The following fiscal incentives will be granted to the LNG Developer. When an LNG Developer or LNG TO/O. LNG Buyer or LNG Developer importing LNG will also be exempted from withholding tax at import stage in respect of such import. Import of such plant. not locally manufactured. QATA R LNG PRODUCING CAPABILITY According to Oil & Gas Journal as of January 1. 2011. dated 7/08/2004. equipment and machinery.

the last two plants in Qatar's liquefied natural gas (LNG) expansion plan. The Sui Southern Gas Company (SSGC) is already working to establish an LNG terminal in the country. A four-member delegation will leave for Qatar within a week to finalize plans including Page 6 of 11 . have yet to reach capacity. By end of this year we will be producing 77 million (tones). chief executive of Qatar International Petroleum Marketing Co (Tasweeq). Today. NaveedQamar said LNG import from Qatar would be instrumental in overcoming energy-related issues of Pakistan. operated by the state-owned Qatar Gas Company. which is transferred to plants known as ‘the trains’. The cost of LNG to be imported from Qatar would be equivalent to the price of furnace oil. It would also help accelerate economic growth that is hurt by power and gas shortage. It would also prove as an environment-friendly fuel. Pakistan requires additional gas supply for at least five years when there is likelihood of IranPakistan (IP) gas pipeline becoming operational.[2] Together. Qatar reportedly surpassed Indonesia to become the largest exporter of LNG in the world." 5. an official at the ministry of petroleum and natural resources said Wednesday. but it would result in fuel diversification in the country. Domestically.600 million cubic feet natural gas per day." he said. Qatar gas trains six and seven. Pakistan – Qatar LNG project Qatar is one of the largest LNG producers of the world. In 2006. Import of LNG from Qatar would ensure regular fuel supply to industrial units and power plants at a time when furnace oil prices shot up in the international market. Saad Abdullah al-Kuwari. with an annual LNG production capacity of 42 million tons per annum (MTA). established in 1984. the vast majority of Qatar's total energy consumption comes from natural gas (79%). particularly for export as liquefied natural gas (LNG). the head of the state oil marketing company said on Sunday. According to a recent development reported by The Nation on 11th Jan.Top LNG exporter Qatar will reach full export capacity of 77 million tones per year by the end of 2011. LNG is one of the fastest growing fuels in the world and due to high demand. told Reuters in an interview. revenues from the oil and natural gas sectors amount to 60% of the country's GDP. 2012: “Pakistan plans to import around 500. 6 and 7 from Qatar gas. Qatar produces around 1.While Qatar is a member of the OPEC and is a significant oil producer. has pioneered the Liquefied Natural Gas (LNG) Industry in Qatar. "The last two trains. they did not reach operating capacity. Qatar gas is the largest LNG producing company in the world. Qatar gas. "Train 7 is almost stabilized and now it is ramping up.000 Mcf/day of LNG from Qatar starting at the end this year. while the balance is supplied by oil. the government has devoted more resources to the development of natural gas in recent years. which are 300 meters long and the trains process the natural gas into exportable liquefied natural gas (LNG). its supply has been under stress.

The federal minister said that Pakistan would attract $10 billion foreign investment this year including 6 billion dollars to 7 billion dollars from China adding that major investments would come in telecom communication and oil and gas sectors. meaningful steps must be taken to curtail residential consumption. Page 7 of 11 . Foreign Investment in Pakistan Federal Investment Minister Senator Waqar Ahmad Khan said here on Tuesday that Qatar will start providing Liquefied Natural Gas (LNG) and Liquefied Petroleum Gas (LPG) to Pakistan by November this year. domestic users at 19%.458 Bcf/d in 2011-12 to 3. while prioritizing supply to the fertilizer and power sectors. Following the finalization of the plan with Qatar. the official said. the State Bank of Pakistan said last month in a report. He was addressing at press briefing here on Tuesday after returning from his visit to China. Pakistan's gas shortfall is expected to hit 3. Pakistan gave licenses to three companies -.28 Bcf/d against estimated demand of 7. and transport 10%. and the country will become increasingly dependent on imports to meet its energy demand. Hong Kong and State of Qatar. “Qatar would provide 1.4 Bcf/day. they want to have strategic investment in Pakistan to lead the country as well as the region towards economic stability.” [7] 6. the gas shortfall is estimated to grow from 2.5 million tons LNG and one million tons LPG to Pakistan. The government estimates gas consumption by the power sector at around 29%.497 Bcf/d and will expand to around 6. Terming his visit to these countries as very successful. The shortfall is expected to increase to 3.Pakistan Gasport. Engro Corporation and Global Energy Infrastructure to bring 1. the central bank said.prices. Last year. Pakistan is expected to use these terminals to bring LNG into the country after paying these operators. the official said.” he said adding that decision regarding the necessary logistics for fuel transportation would be finalized within a month. and these companies are to build terminals to handle the LNG.5 billion cubic feet/day LNG into Pakistan. fertilizers 15%. the federal minister said that he had got very positive response from investors as Pakistan offers great investment opportunities in various fields of economy. While rationing of natural gas is inevitable in the near future. As a result.18 Bcf/d in 2014. as demand is estimated at around 5.021 Bcf/day in 2016 with no big discoveries in sight.2 Bcf/day. with projected gas supply of 4.2 Bcf/d. The net demand in fiscal 2011-12 (July-June) is expected be around 5.354 Bcf/d by 2015-16.2 Bcf/d to 5. Qatar will provide LNG to Pakistan based on a sovereign guarantee from Islamabad.021 Bcf/day in 2015-16. industry at 26%.46 Bcf/d. Pakistan now faces a gas shortfall of about 1 Bcf/d to 1. while production is 4. Senator Waqar said that nobody in China and Hong Kong raised question about security in Pakistan rather.

which was largely due to temporary factors including seasonal maintenance in the Gulf of Mexico and temporarily shut-in production in lower-48 onshore Page 8 of 11 . projecting output to average a record high 65. EIA has expected that marketed natural gas production in 2012 to rise by 1.2 BCF/D in 2010.825/MMBTU. which began on 28-Oct.4 percent growth in 2010. EIA: slower gas production growth in 2011 EIA has forecasted that the US natural gas marketed production will increase 2. 7. dropping from $3. or about 7 percent of its value. EIA: the US gas output to be increased more The US Energy Information Administration (EIA) has predicted that the country’s natural gas production in 2012 will be increased by 2 percent from this year's record-high levels.7 percent YoY to about 67. which more than offset continuing declines from the Gulf of Mexico. The US LNG import is expected to fall 25 percent to 0. expecting average demand to rise by 0. falling from $3. He said that a MCC delegation is expected to visit Pakistan on July 9 for exploring various options for investment.3 percent this year. the EIA has lowered its previous outlook for marketed gas production. Growth in the industrial and electric power sectors helped drive 2011 consumption gains.1 BCF/D in marketed natural gas production in February 2011. For 2011. the December 2011 contract has lost 27. The NYMEX near-month (December 2011) contract lost 9.3 BCF/D to a record 66.6 BCF/D. however.749/MMBTU to $3. During its tenure as the near-month contract. major investment is coming from Metallurgical Corporation of China (MCC) and China Mobiles adding that MCC eyes on investment up to 4 billion dollars whereas the mobile company aims to reach 25 million consumers. GLOBAL LNG DEVELOPMENTS IN 2011 SOME KEY POINTS 1.8 BCF/D as it projected that gas demand to climb 1.” The EIA has also raised its prior forecast for the US natural gas consumption growth in 2012.945/MMBTU to $3. up 6. He said that China would also host a seminar which would provide Pakistan an opportunity to attract Chinese potential investors to invest in Pakistan adding that this would be followed by another seminar to be held in Pakistan. For the next year. The updated forecast incorporates a decrease of 1.He said that from China. LNG import in 2012 is expected to fall further to 0. the administration said in its latest “Short-Term Energy Outlook” (STEO) report released on 8-Nov-2011.9 BCF/D.1 cents.7 cents last week.1 YoY. 2. the EIA expected that prices rising only slightly to $4. according to the STEO. considerably less than the 4. “All of the growth in production results from increases in onshore production.652/MMBTU on 9-Nov..9 BCF/D this year. down from 1.1 BCF/D. with record heat in the third quarter stirring a healthy increase in demand for air-conditioning across much of the nation. EIA has forecasted that Henry Hub gas prices in 2011 to average $4. He said that China would be spending $100 billion in foreign investment and it would be Pakistan’s top priority to attract maximum portion of this investment. The 12-month strip (the average of the 12 contracts between December 2011 and November 2012) also fell last week.13/MMBTU.06/MMBTU.7 BCF/D. the EIA said.

and rise 2 percent to 66.6 BCF/D in 2010 to 61. according to the latest EIA Short-Term Energy Outlook. as reported by Baker Hughes Inc." MIS said.2 BCF/D in 2012. according to the EIA forecast.3 and 4. However. EIA expects gross pipeline imports of 8.15/MMBTU to an average of $4. more specifically. The EIA forecast shows the Henry Hub spot price averaging $4. 3. Total marketed production is expected to fall slightly this year. EIA forecasts a decline in net gas imports. It expected that gas prices slowly increasing to $5/MMBTU in 2012.1 BCF/D in 2010 to 18.4 BCF/D in 2011. respectively. while commercial and residential consumption largely remain flat.5 BCF/D in 2012. (On this basis..7 percent and 1. "at least for the first half of 2011. Total natural gas consumption will remain flat from 2010 to 2011.) EIA said that annual average Henry Hub spot prices are also expected to decline slightly in 2011. as a result in part of a significant decrease in production in the Gulf of Mexico. Financial firms: The US gas price is not shiny in 2011 Moody's Investors Service (MIS) had predicted that the US natural gas prices which are currently at their floor level.4 percent. largely because of the large price disparity between the two fuels on an energyequivalent basis. More rigs are being directed toward oil instead of gas. "Weak prices have not slowed down natural gas production so far and we expect this situation to continue suppressing E&P margins through 2011. from 61.7 BCF/D with expected increased demand and prices. MIS projected that the US gas prices reach $4." MIS noted. averaging $4. In 2012. year-over-year decreases of 4.6 percent.4 BCF/D in 2011. However. respectively. as the natural gas-weighted industrial production index increases during the year. The number of rigs drilling for natural gas. EIA expects production will recover from February levels but begin modest month-to-month declines that could continue through the year because of reductions in the number of active natural gas drilling rigs. unlikely to rise substantially in 2011.02/MMBTU in 2011. the projected Henry Hub spot price rebounds. falling $0. For 2011 and 2012. has fallen from 973 in April 2010 to 882 as of 29 April 2011. Page 9 of 11 . 4. Offsetting the weak profit forecast for natural gas will be higher profits in natural gas liquids. made up for in part by increases elsewhere. The projected year-over-year increase is driven by increases in the electric power and industrial sectors. EIA: the US gas demand will rise in 2011 The US natural gas consumption is expected to average 65. The EIA said in its latest “Short-Term Energy Outlook” (STEO). MIS said that the weak gas prices will not deter producers from drilling more shale wells in 2011 because they need to hold acreage by production or fulfil their joint venture commitments. released on 10-May.5/MMBTU over the year. the EIA said. Reported residential and commercial consumption levels are expected to decline by 0.6 BCF/D in 2011 and 8. primarily because of changes to EIA’s methodology for collecting and reporting natural gas consumption data. Industrial consumption rises from 18.production fields resulting from severe weather.50/MMBTU this year. the EIA projected that gas production rebounds in 2012 to 62. a decline of about 8 percent from 2010. crude oil is generating close to three times as much revenue per dekatherm of energy than natural gas.24/MMBTU in 2011.4 BCF/D in 2011.

Barclay said that gas prices may fall as low as $2/MMBTU this year but power generators displacement of coal with cheaper gas will push up the prices to stay at the $4/MMBTU range.” Baker Hughes had reported that the US gas rig count declined to the lowest level in 10 months and reach 919 at the end of 2010. Last year.4 BCF/D of power demand from coal in the US at an average price of $4. They keep drilling because they are generating profits either from higher-priced liquids or because their costs are at rock bottom. because much of their production is hedged at prices higher than $4/MMBTU. 5. aggressive pursuit of hydroelectric power generation. Macquarie predicted that gas prices would average $5. “The gas rig count needs to drop below 850 to have any price impact and he doesn't see that happening anytime soon. http://www. a prospect he doesn't see happening because the power market will sop up the cheap gas instead of burning coal. 9. and enhancing nuclear power generation capacity are some of the key elements of this strategy.50/MMBTU in 2013. and he doesn't see that changing. CONCLUSION: At present Pakistan is pursuing a multidimensional pro-longed strategy to ensure adequate and uninterrupted oil and gas supply and other energy resources to sustain the present pattern of energy for the rapid national economic growth. not only would a wave of producers revisit drilling budgets.Investment bank Macquarie has reported that it has unchanged its previous forecast for the US gas price at $4. we expect that in a $2 market. Reference: 1. gas picked up 2.com/2009/05/21/pakistan-qatar-ministers-met-to-discuss-lng-trade/ Page 10 of 11 . because of shale gas production is squeezing US gas prices for the next three years. because drillers are making money with the current 900-plus number of rigs in operation.38/MMBTU.” 8. Having added significant reserves in shale plays. the investment bank reported on 19-Jan. However.” “While well-hedged producers will continue drilling in a $4 gas market. the producers are still getting better at developing the new resources. Greater reliance on gas.25/MMBTU next year and $5. “The producers will only slow drilling and shut in production if prices fell to $2/MMBTU and stayed there for a prolonged period.4/MMBTU for 2011. Barclay estimated.lngpedia. The bank has also forecasted that gas producers will keep drilling activities in spite of the low prices. Investment bank Barclay has predicted that US gas prices would be at $3. but a number would also consider shutting in existing production.94/MMBTU in 2011. Stuart said.

com/2011/08/06/energy-crises-in-pakistan/ 6.dailytimes.eia. Government of Pakistan. ministry of petroleum & natural resources liquefied natural gas (lng) policy.reuters.asp?page=2010%5C01%5C09%5Cstory_9-12010_pg5_7 5.html 7. http://www. 2011 Page 11 of 11 . The Nation. www.html 9. 8. 11th Jan.com/develop2009.com.globallnginfo.gov/cabs/qatar/Full. 2012. http://www.com/qatargas-education.com/article/2011/06/05/qatar-lng-idUSL3E7H502F20110605 3. http://www.2. http://www.qatargas.pk/default.htm 4. http://haroonhaider.