LNG revolutionising Pakistan’s energy sector

ISLAMABAD: Some four centuries ago, French philosopher Jean de La Bruyère remarked: “The pleasure of criticism takes away from us the pleasure of being deeply moved by very fine things.”

If one looks at Pakistan’s print and electronic media, it would appear that nothing has gone right for the liquefied natural gas (LNG) projects in the country. However, the rest of the world has a completely different view of the matter.

They marvel as to how quickly the government of Pakistan was able to sign contracts at the most economical prices, build LNG terminals and other infrastructure, and actually begin using the gas to alleviate severe energy shortages.



Natural gas has always been a great blessing for Pakistan. The year 1952 was a difficult one as the country was facing serious challenges such as drought, locust attack, balance of payments problems and settlement of millions of refugees.

Then fortunately, a major discovery of natural gas was made at Sui. Over the next six decades, Sui and other subsequently discovered gas fields played a major role in the economic development of the country.

The development of infrastructure to transport gas to the entire country has been quite a success story. Pakistan now has the world’s most extensive inland natural gas supply system with around 140,000km-long pipelines.

Over the years, there has been a phenomenal increase in the demand for gas. This has been caused by several-fold increase in population and growth in the economy which has been on average over 5%. This has caused the demand to outstrip production.

In 1996, Inter State Gas Systems was established with the initial mandate to import natural gas through a proposed Iran-Pakistan-India (IPI) pipeline project, which was later renamed as Iran-Pakistan (IP) pipeline after the withdrawal of India from the project. Despite various political commitments for its early completion, the situation is unclear.

Another project was envisaged to bring gas from Turkmenistan to Pakistan via Afghanistan and onwards to India. Work on this project has started and is scheduled to be completed in 2020.

Alternatives

There being no certainty about piped gas from the neighbouring countries and the energy crisis getting serious, the government looked at alternatives and concluded that LNG was the most economical and feasible option.



In 2005, the first LNG policy was announced. This was later revised in 2011. However, not much progress could be made to actualise these policies.

When the PML-N assumed power in June 2013, it started working at a swift pace. The government entered into direct negotiations for LNG purchase from the government of Qatar, the world’s largest producer and exporter.

At the same time, it awarded a contract to Engro to set up an LNG regasification terminal at Port Qasim. In a record time of about one year, all the work including dredging at the port, setting up the complex infrastructure and building the regasification plant was completed.

Imported LNG is now being sold to power plants and other sectors. Another processing plant with the same capacity as the first one (600 million cubic feet per day) is expected to be commissioned in November 2017.

Two more plants are under process. When all the LNG terminals are completed, it would revolutionise the energy sector with the availability of abundant low-priced LNG.

Benefits

Already some results are becoming evident. The most obvious effect has been on the use of compressed natural gas (CNG) in automobiles. Almost 75% of around 3,200 CNG pumping stations operating in 2012 have restarted their operations, according to the All Pakistan Compressed Natural Gas Association.

Pakistan was amongst the top CNG-user countries with 3.7 million CNG-run vehicles before 2012. Since LNG is at least 30% more economical to use, its availability to automobiles will result in considerable savings for consumers as well as the government. The other advantage is that CNG is a cleaner fuel.

It is not just transport and power sectors that are the major beneficiaries, other sectors benefit as well. Gas is used as raw material in the manufacture of fertilisers and this year Pakistan has become a net exporter rather than an importer of the commodity.

It is time other sectors such as Railways start planning to switch from diesel-run locomotives to LNG. This would save 40-60% of fuel cost.

Our obsolete furnace-oil based power plants should be replaced by more energy-efficient LNG-based plants as is already being done in India. This is expected to save $1.5-2 billion in foreign exchange annually.

With the availability of cheaper fuel, Pakistan’s competitiveness will increase, resulting in revival of exports and the overall economy.

With the completion of the China-Pakistan Economic Corridor (CPEC) early harvest projects, and no energy worries, the incoming government in 2018 would inherit a Pakistan different than what it was only four years ago.

The writer served as Pakistan’s ambassador to the WTO from 2002 to 2008

Published in The Express Tribune, October 9^th, 2017.

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