PTI govt to expeditiously pursue IP gas pipeline project

Published: January 19, 2019
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SSGC says that two continuous ruptures in its main transmission pipelines this week have reduced gas supply tremendously. PHOTO: FILE

SSGC says that two continuous ruptures in its main transmission pipelines this week have reduced gas supply tremendously. PHOTO: FILE

ISLAMABAD: The United States has intensified sanctions against Iran, making almost impossible for it to do business with its neighbouring countries, including Pakistan. However, policymakers of the Pakistan Tehreek-e-Insaf (PTI) government say the much awaited Iran-Pakistan (IP) gas pipeline project would be pursued expeditiously in the context of regional cooperation in the energy sector.

The policymakers fear worst gas outages in the country in the coming years and anticipate that there will still be a gap of 3,263 million cubic feet per day (mmcfd) in 2022-23 despite gas pipeline projects.

In order to bridge the gap, they recommend vibrant petroleum policies to accelerate exploration and production (E&P) activities, construction of more LNG terminals and expeditious implementation of the Turkmenistan-Afghanistan-Pakistan-India (Tapi) project with the capacity of 1,325 MMCFD which is already under implementation and is expected to be come online by December 2021.

They say the IP gas pipeline project with a capacity of 750 MMCFD – which is not progressing well – could be constructed on fast track basis with 24 months. It will further reduce the gap to 2,513 MMCFD.

The policy makers feel that phenomenal growth in demand for transport fuel and rising trend of the crude prices in the international market may pose a challenge to the PTI government.

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Recently, Saudi Arabia and the United Arab Emirates (UAE) have announced bailout packages for the PTI government and experts and officials now view revival of the IP gas pipeline project with faded hope.

Even, during the last Pakistan Muslim League-Nawaz (PML-N) government, the former prime minister Nawaz Sharif had scrapped the LNG Gwadar pipeline project after his visit to Saudi Arabia in 2017.

The LNG Gwadar project was an alternate plan to implement the IP gas pipeline project amid the US sanctions against Tehran. Riyadh had asked Sharif to cut ties with Iran and Qatar. The PML-N government had scrapped the LNG project to ease pressure but continued diplomatic ties with Qatar.

“To supplement the indigenous gas supply in addition to the LNG imports, natural gas import projects like Tapi and the IP would be pursued expeditiously in the context of regional cooperation in the energy sector,” the PTI policymakers say in 12th Five Year Plan (2018-23) while discussing energy scenario of Pakistan in the next five years.

They view the 18th amendment as a major cause of slow oil and gas exploration activities due to unclear roles of provincial and federal governments. They say the overall exploration and development activities and investment by the foreign companies have suffered. Although, the gas demand supply gap has been filled through LNG imports to some extent, however, it could not fix the problem permanently.

They say the PMML-N government took policy decisions on case to case basis in respect of refineries, oil and gas logistics and marketing and pricing due to absence of a dynamic downstream oil and gas policy.

Data for gas supply and consumption in the past six years (2011-2017) including the PML-N era shows that indigenous gas production declined from 1.56 trillion cubic feet (TCF) to 1.46 TCF per annum.

The trend indicates no major increase in production due to absence of major discoveries. The demand-supply gap of about 2 billion cubic feet per day (BCFD) was experienced during the period. Increased consumption during 2015-16 and 2016-17 reflects addition of about 1.0 BCFD through LNG import.

Currently two R-LNG terminals are in operation processing 600 MMCFD each. For Terminal-I, the Pakistan State Oil (PSO) has made a 15-year agreement with Qatar Gas for 500 MMCFD and a 5-year agreement with Genvor for 100 MMCFD. For Terminal-II, the Pakistan LNG Limited (PLL) has made a 15-year agreement with the ENI for 100 MMCFD and a 5-year agreement with Genvor for 100 MMCFD.

Although, the gas demand-supply gap was filled through LNG imports but the induction of imported LNG in the system also results in complications regarding allocation and parallel tariff mechanism for indigenous and imported LNG.

To address the issue of tariff and related aspects, the Petroleum Division completed gas sector reforms with the help of the World Bank. However, these reforms could not be finalised and approved by the Council of Common Interest (CCI).

In such scenario, the policymakers say the government would introduce electric vehicles in the transport sector to encourage efficiency and conservation of fuels and to decrease petroleum products’ import bill. This will also improve the environmental and economic growth in the country.

Oil production

The indigenous oil production during the past six years remained in the range of 70,000-90,000 barrels per day.  Due to insufficient local production and refining capacity, the demand was mostly met through imports of crude oil and petroleum products.

The transport sector remains the major consumer of around 60% of oil products. The active oil refining capacity of only 13 million tons per annum against the consumption of 26 million tons petroleum products result in massive imports of crude and petroleum products with import bill of US$ 9.10 billion during 2017.  No state-of-the-art refinery has been established in the country in the last 15 years.

Policy decisions were taken on case to case basis in respect of refineries, oil and gas logistics and marketing and pricing due to absence of a dynamic downstream oil and gas policy. New state-of-the-art refineries would be established for minimising the import of refined petroleum products.

Parco Coastal Refinery (PCR) of 250,000 barrel per day capacity is likely to be commissioned at the end of plan period expected to save US$1 billion by substituting expensive imports of refined products.

To enhance local oil and gas exploration, the existing petroleum policies would be reviewed and efforts would be maximised for attracting foreign investment through open competitive bidding as well as on government to government bilateral cooperation. The federal and provincial collaboration would be improved with clear roles and responsibilities for exploiting the indigenous oil and gas potential.

Upstream sector

To achieve accelerated oil and gas exploration, the Petroleum (Exploration & Production) Policy 2012 approved by the CCI would be reviewed as per policy provision.  An upstream regulator would be established for bifurcation of policy and regulatory functions exercised by the Petroleum Division.

To tap unconventional gas resource potential of the country, shale gas policy would also be formulated.  To supplement the indigenous gas supply in addition to the LNG imports, natural gas import projects like Tapi and the IP would be pursued expeditiously in the context of regional cooperation in energy sector.

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