LNG: the game changer

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