Govt gives green light to five LNG terminal plans – Business

The government approved five consortiums, including Exxon Mobil, Royal Dutch Shell and Mitsubishi, to move forward with their liquefied natural gas (LNG) terminal plans, said a minister Reuters on Friday.

The measure comes immediately after the arrest of two business executives involved in the construction of the country's previous LNG terminals, which cools the sentiment in the industry.

Pakistan is seen as a large growing market for the global LNG industry, as national gas production slides along with a growing industrial economy hungry for gas.

But an anti-corruption campaign by Prime Minister Imran Khan led to the arrest of a former Engro chief, who built the first import terminal, and the head of another company associated with a second terminal.

The Minister of Energy and Petroleum, Omar Ayub Khan, downplayed any impact that the arrests could have had on the sentiment of investors, saying that the interest of multinationals spoke for itself.

"It is a strong endorsement that (our) policies are clear and transparent," he said. "It is a competitive market."

The groups approved to progress are Tabeer Energy, a unit of Mitsubishi, Energas with its partner Exxon; Pakistan GasPort and the commodity trader Trafigura; He joined his partner Shell and Gunvor with the Pakistani conglomerate Fatima.

Tabeer Energy, Engro and Energas have already announced plans for the terminals that will be vessels of the Floating Regasification and Storage Unit (FSRU). These can be new or converted LNG tanks, which accelerates the delivery of import projects.

Exxon and Shell did not respond to requests for comments. Mitsubishi has project details on the Tabeer Energy website. Engro, Fatima and GasPort were not immediately contacted to comment.

Trafigura declined to comment on the specific project, but said he was "committed to growing and expanding his existing regasification capacity" in Pakistan.

The five groups must submit the plans for the terminals to the ports and shipping ministry before November 5 for approval, but the cabinet has already approved them, Khan said, adding that they could be operational within two to three years.

While the consortiums will pay for the construction of the terminals and royalty fees, Pakistan's contribution will be to finance the construction of a $ 2 billion north-south pipeline to distribute the gas and storage facilities, he said.

Significant dents

Pakistan has chronic gas shortages for energy production and for supplying manufacturers such as fertilizer manufacturers, which hinders the country's economy.

Its two LNG plants have a capacity of 4.5 million tons per year (mtpa) each. Khan said a third terminal of 4.5 mtpa could start next year. Imports amounted to 6.7 mtpa in 2018 and are expected to increase to 7.9 mtpa this year, according to Refinitiv data.

The new terminals "will make a significant dent in the gas shortage," Khan said.

But the underutilization of a terminal points to a structural problem in Pakistan's energy industry, according to analysts, which is characterized by subsidized but increasingly reduced domestic gas that rivals the most expensive LNG.

"I think they are evaluating demand since the second LNG terminal is currently underutilized," said an industry source. “Domestic gas is cheaper and LNG is expensive. In addition, we have some coal plants that are cheaper than RLNG power plants. "

The fertilizer industry, a large consumer of gas, has suffered a sharp increase in prices set by the government, said Sher Shah Malik, executive director of the Fertilizer Manufacturers Advisory Council of Pakistan. Reuters.

Two of Pakistan's urea plants lack gas to run regularly and one closed last year, forcing Pakistan to import fertilizers. Malik said that LNG, with an international reference price, was often too expensive for fertilizer companies, pointing out the need to take advantage of new national gas reserves.

"We are heading for very difficult times," he said. "If nothing happens, we will be tall and dry."

Source: https://www.dawn.com/news/1506327/govt-gives-green-light-to-five-lng-terminal-plans

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