ISLAMABAD: China has withdrawn its offer of setting up a liquefied natural gas (LNG) terminal at Gwadar Port on the build-and-operate model and now wants to work as an engineering, procurement and construction (EPC) contractor for the project.
“In response to the revision of offer by China, Pakistan will own and operate the terminal and award EPC contract to the Chinese company working on the Gwadar LNG pipeline project under a government-to-government arrangement,” an official told The Express Tribune.
The government is also considering setting up two jetties at Gwadar Port with two floating LNG terminals at a cheaper cost for handling 1.2 billion cubic feet of imported gas per day (bcfd).
According to the official, a meeting of the price negotiation committee has already been held. The Exim Bank of China will provide financing at the rate of London Inter-bank Offered Rate (Libor) plus 2%.
During initial negotiations, the official said, it was discussed that tolling fee for the Gwadar LNG terminal would be 30 to 32 cents per million British thermal units (mmbtu) due to lower government profit.
Earlier, the lowest bidder for the second LNG terminal, to be set up at Port Qasim, had quoted a fee of 41.70 cents per mmbtu.
The Ministry of Petroleum and Natural Resources is working on the project plan for the Gwadar LNG terminal, which will be sent to the Planning Commission for approval.
According to the official, one more floating ship will be installed at Gwadar Port with 10% additional cost. It will help store LNG in case of congestion at Karachi Port.
The Executive Committee of National Economic Council (Ecnec) has given its approval for the Gwadar LNG pipeline, which will give a good signal to Iran, as Pakistan has planned to extend the pipeline by 80 km to connect it with the Iranian border.
The government is pushing ahead with this project as an alternative because of international sanctions on Iran in the past. The official pointed out that the government would be able to import 2.4 bcfd of LNG through the terminals at Karachi and Gwadar. This way, the entire deficit of 2.4 bcfd will be met.
At present, the country produces 4 bcfd of natural gas compared to demand for 6.4 bcfd.
One LNG terminal is already running at Port Qasim with a handling capacity of 600 million cubic feet per day (mmcfd). A contract for second terminal at the port, which will also have the 600-mmcfd capacity, has been awarded and work is going on.
Published in The Express Tribune, October 21st, 2016.