Letter of intent issued for second LNG terminal

Govt negotiating with Italy’s Eni for import of 0.75m tons of LNG.

ISLAMABAD: The government has issued a letter of intent to award contract for developing the second liquefied natural gas (LNG) handling terminal at Port Qasim in Karachi, said Petroleum and Natural Resources Minister Shahid Khaqan Abbasi.

Talking to a group of journalists at an event organised by OMV exploration company to mark its 25 years in Pakistan, Abbasi said a consortium of Fauji Oil Terminal and Distribution Company (Fotco) - which also included Pakistan GasPort Limited - had emerged as the lowest bidder and the government had issued it the letter of intent for setting up the second LNG terminal in the country.



The board of directors of Pakistan LNG Terminals Limited, in its meeting on May 6, had approved financial bid of the consortium, which offered a levellised (service) charge of $0.4177 per million British thermal units (mmbtu) with a handling capacity of 600 million cubic feet of LNG per day (mmcfd).

In the next phase, an LNG services agreement will be negotiated and signed with the successful bidder. The project will be completed in 11 months.



First LNG terminal has been built by Elengy Terminal Pakistan Limited that is being run since March 2015.

Abbasi claimed that electricity produced with the help of LNG would be cheaper by four cents per unit compared to oil-based power generation.

He expected the country to save around $1.5 billion annually by consuming gas imported through the second LNG terminal. Pakistan would not only have clean energy but it would also be cheaper, he said. This terminal will have re-gasification capacity for 600mmcfd of LNG that would be shipped to three LNG-based power plants with cumulative generation capacity of 3,600 megawatts. Improved power supplies will help revive the economy that has long suffered due to energy shortages.

The National Accountability Bureau (NAB) and the Public Procurement Regulatory Authority (PPRA) have already given the go-ahead for the award of second LNG terminal contract in accordance with the law.



Responding to a question, the petroleum minister said the government was negotiating with Italian energy giant Eni for the import of 750,000 tons of LNG.

Pakistan is currently receiving LNG supplies from two sources - Qatar and global commodity trading company Gunvor. Every month, three ships arrive from Qatar carrying an average of 300mmcfd and one ship is sent by Gunvor bringing about 100mmcfd. They are supplying at 13.37% of Brent crude price.

Pakistan consumers have been enduring power outages for a long time and successive governments have pumped trillions of rupees into the power sector to pay subsidies due to a higher power generation cost.



Power load-shedding has also hit the economy hard, erasing around 3% off GDP growth every year. Apart from this, several industrial units have been taken to Bangladesh due to the energy crisis.

“LNG is the best solution that will revive the economy,” Abbasi said.

Published in The Express Tribune, May 28^th, 2016.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.