Gas handling terminal: Govt appears to be abandoning LNG retrofit project

May prefer another scheme that is seeking a lower price.

ISLAMABAD:

The government appears to be abandoning a liquefied natural gas (LNG) retrofit project, which was planned to be set up at the terminal of Progas Pakistan – a subsidiary of Sui Southern Gas Company (SSGC), and may instead prefer award of LNG handling contract to private developer Elengy Terminal Pakistan Limited (ETPL).

The previous government had also put this project on hold and the present one also appeared to be dumping it and picking up ETPL’s offer, which has quoted a lower price, sources say.

firm 4Gas had won the bid for setting up the LNG retrofit facility at Progas terminal with a price of 80 cents per million British thermal units (mmbtu). Later, the government floated another tender for LNG terminal services in which ETPL emerged as the successful bidder with the offer of 66 cents per mmbtu as tolling charges.



However, sources pointed out that before the second tender, the price quoted by 4Gas had already been disclosed. In the case of Progas terminal, SSGC was not required to make any investment, but it would receive a fee of four cents per mmbtu, they said.

SSGC’s board of directors had approved the award of contract to 4Gas with the condition that Public Procurement Regulatory Authority’s (PPRA) advice should be sought.

Now, sources said, the Ministry of Petroleum and Natural Resources has suggested to the cabinet to award the LNG contract to ETPL for setting up facilities at its existing terminal. The tolling charges quoted at $0.66 per mmbtu had already been determined by a consultant based on regional and international tolling contracts reached recently, it said.

The ministry pointed out that the consultant had also taken into consideration the engineering estimates of similar projects. Furthermore, in a similar project, advertised by SSGC, the tolling charges were quoted at $0.80 per mmbtu.

According to sources, the ministry meant that the project advertised by SSGC was not viable.

SSGC LPG (Private) Limited’s liquefied petroleum gas (LPG) import terminal at the Port Qasim is currently suffering a loss of $1 million per year. A retrofit facility at the terminal for simultaneous handling, storage and regasification of LNG would transform this loss-making entity, at no cost, into a profitable enterprise, an official said.

This would be possible with the help of a joint venture and existing terminal infrastructure via a transparent and compliant tender process, the official added.

The project was to be completed in 22 months at an estimated cost of $163 million.

In India, LNG tolling prices range from $0.605 to $1.106 per mmbtu. In Indonesia, the tolling price is $1.8 per mmbtu for handling LNG at the floating terminal and $1.2 per mmbtu for land terminal.

Average tolling price based on the year 2010 was $0.73 per mmbtu in the US and Canada, $0.87 in China, $0.81 in Europe, $0.89 in South Korea and Japan, $0.72 in the Middle East and $0.71 in Southeast Asia.

Published in The Express Tribune, April 11^th, 2014.

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