The first shipment carried by a floating Storage and Re-gasification Unit (FSRU), leased to convert liquid natural gas into natural gas arrived at Engro’s LNG Terminal at Port Qasim last week end.
According to government energy plan, this import liquid natural gas will be used for power generation to cut the costly fuel oil used by over 60 percent of thermal power generating units. The induction of LNG into Pakistan energy basket is expected to provided much sought after relief especially to heavily pressurized natural gas besides reducing the cost of power generation as well as oil import bill, which had gone beyond $16 billion last year. Although the plunging oil prices had provided a relief to import bill of Pakistan, yet the low oil price was not predictable and we have to find an affordable replacement of the costly oil. It may be noted that with the beginning of Yemen and Saudi Arabia’s issue the oil prices have started to move upward, hence by no means the thermal power generation, which demands huge expenditure on import of oil is practically viable for Pakistan economy and we have to get rid of the oil based power generation to bring down power tariffs, which are highest in the region.
If the LNG experience proved a success, there is an ample scope of private sector investment in building up more LNG terminals while at least two more are already in the process one at Port Qasim and the other at Gwadar Port. The present government has put the energy issue on top priority and hopefully the issue will be resolved completely with in next couple of years.
Engro Elengy’s Chief Executive Officer, Sheikh Imran-ul-Haque in a media briefing said Engro Elengy, the company that won the contract to handle liquefied natural gas (LNG), has acquired this vessel on lease. It has built an LNG terminal, at Port Qasim for the purpose which is ready to receive shipments from March 10 onwards. “We are ready”, he said, adding, “The vessel would start operation the moment it gets green signal from the concerned authorities of the government”, he said.
Engro has fulfilled its commitment by constructing all infrastructure facilities in record 300 days. It may be noted that Floating Storage and Re-gasification Units (FSRUs), are purpose-built LNG tankers that incorporate onboard equipment for the vaporization of LNG and delivery of high-pressure natural gas. These vessels load in the same manner as standard LNG tankers at traditional liquefaction terminals and also retain the flexibility to discharge in three distinct ways: As a liquid at a conventional LNG receiving terminal; as a gas through the FSRU’s connection with a subsea buoy in the hull of the ship; and as a gas through a high-pressure gas manifold located forward of the vessel’s LNG loading arms.
Sheikh Imran-ul-Haque said: “concerned authorities are yet to announce a firm agreement with any LNG supplier. Elengy, a subsidiary of Engro, is dealing the project, which has a total cost of $133.3 million. Engro financed construction of jetty, a 24-kilometre long pipeline, and got the lease of FSRU on its own. Besides, the Asian Development Bank loan, International Finance Corporation (IFC) and local banks will provide $20 million and $50 million, respectively. The remaining $33.3 million has come in as equity investment.
Timely completion of Engro terminal
It may be noted that Engro’s Elengy Terminal (Pvt) Limited (ETPL), the $135 million liquefied natural gas (LNG) terminal has been completed in a record time and now we are waiting for the government to finalize LNG procurement deal,” Sheikh Imran-ul-Haque CEO of ETPL said. “If the commodity is not delivered by March 31, 2015, the government would be liable to pay the capacity charges.”
The FSRU Exquisite, the floating storage and re-gasification vessel is anchored at Dubai Dry docks and will be ready to make sail by March 15, 2015. As per the agreement, the government will have to pay $272,000/day for not importing the LNG by March 31. The government has so far virtually failed to ink an LNG deal with any country, including Qatar.
Industry officials said international dealers are hesitance to supply LNG to Pakistan for power sector, which is virtually hit by circular debt and IPPs are not willing to make an agreement with LNG supply for back to back L/Cs.
Talking about their bid regarding second FSRU terminal at Port Qasim, Imran-ul-Haque said they were hopeful about the result. He said that LNG import was inevitable for the country as it would address several energy scarcity issues.
“Given the energy demand of the country, only LNG import would not be sufficient. Pakistan will have to import other commodities also to streamline its energy mix,” he added.
Engro’s LNG Terminal is completed even before the financial close. Engro Corp funded this project under bridge loans. However, recently Asian Development Bank (ADB) has approved a $30 million project loan for the terminal. Imran-ul-Haque informed that the money would be transferred to them by early next month, which would have to be retired in 8-10 years. Along with ADB’s loan, International Finance Corporation is expected to fund 15 percent of the project cost and local banks will finance around 35 percent. The rest of the project financing will come from equity proceeds, for a total cost of around $135 million.
The fuel, suitable for use at most of the country’s combined cycle power plants, will be supplied to Sui Southern Gas Company’s gas distribution network via a new high pressure pipeline. The plant has the capacity for re-gasification of up to 600 mmcfd. The government had tendered for its requirement of 200 mmcfd but Engro has developed a surplus capacity setup.
Engro is in negotiation with other parties for the utilization of its surplus capacity. SSGC has tendered for another terminal at Port Qasim, while a consortium of three investors is developing plans for another facility in nearby Karachi.
Savings for the country
Pakistan urgently needs to utilize its existing power generation capacity fully, while reducing its reliance on costly imported diesel fuel for electricity generation.
Re-gasification of LNG will allow generation facilities to reach their maximum potential, using a cleaner and more efficient fuel, and will support the country’s push for greater energy security and diversification.
The converted fuel will help the government make an estimated savings of about $1.0 billion per annum on its current fuel import bill of nearly $15 billion.