Pakistan’s natural gas shortfall sits around 1.5-2 billion cubic feet per day (bcfd). When viewed in terms of unconstrained demand, the shortfall goes up to as high as 4 bcfd. The local production, even if it ramps up considerably, is not going to cut the deal. LNG in the gas mix is now a reality, and could also be the future. The need to put the systems in place to ensure supply of gas, to all prospective users, must be top on the priority list of the government.
The two LNG terminals in Pakistan are currently managing the load. A third one is planned to be built at Port Qasim by Tabeer Energy, which is a 100 percent affiliate of Mitsubishi Corporation. It has been a year since the company initiated discussions with the relevant authorities. For a country where FDI is hard to come by – the bureaucracy bottlenecks to this extent, that too, with a company that has a proven track record of 60 years of presence in the country and is a globally huge name, are a worrying sign.
Consider the fact that the very core of the whole project, the Port Qasim Authority’s (PQA) Letter of Intent (LoI), is yet to be granted. Without the LoI, the land cannot be officially secured, final investment decisions cannot be made, and the regulator cannot be approached for the construction license. Imagine the ire of an investor that is willing to put in $400 million, in an out-and-out commercial project with zero sovereign guarantees or liabilities, when the reason for delay in issuance of LoI turns out to be the incomplete board at the PQA. Talk about being investor friendly, and wonder why Pakistan ranks in ease of doing business wherever it does.
It has been learnt that the PQA board is now finally complete and the LoI should now happen smoothly. The final investment decision is expected by second half of 2019, should there be no more bureaucratic hurdles in the way. Herein lies another test for the state-run SSGC and SNGPL, who will be required to build a separate pipeline, for the LNG to be transported from Karachi to Punjab.
The existing network certainly does not have the capacity to carry the load. In an ideal world, laying pipelines takes lesser time than constructing a terminal – which could take up to 15 months. But Tabeer Energy would only make the investment decision, once assured of pipeline construction. Ideally, this should not become an obstacle.
But the petroleum ministry’s handling of affairs in terms of demand projection, fuel arrangement, and coordination with other ministries, does not necessarily inspire much confidence. One hopes that reputable investors, investing in energy projects purely on commercial grounds, without creating any liability for the government, are facilitated. The LNG terminal could make way for more terminals by other players in the channel, which is deeper and wider.
This would also give a new lease of life to many industries, especially the CNG sector, which rightly sits last on the natural gas supply list. Direct employment from terminal operations may not be huge, but the indirect impact could be massive.