ISLAMABAD: After getting a liquefied natural gas (LNG) supply contract from private-sector consumers, US energy giant ExxonMobil is planning to build the third LNG terminal in Karachi as a joint-venture partner.
Some time ago, ExxonMobil, in collaboration with Pakistan’s exploration and production companies, drilled an offshore well to search for hydrocarbon reserves in the Arabian Sea. However, the effort could not prove successful.
Now, in a new venture with Energas consortium, the US firm is going to invest in setting up an LNG terminal in Pakistan.
Earlier, ExxonMobil, the world’s largest publicly traded oil and gas firm, had inked an agreement with Universal Gas Distribution Company (UGDC) - an association of CNG station owners and operators - for LNG supply.
This came after the Pakistan Tehreek-e-Insaf (PTI) government allowed the private sector to utilise the idle capacity of existing LNG terminals and pipelines of public gas utilities. It will break the monopoly of public-sector companies and the private sector will be able to bring LNG at cheaper rates.
Of the five interested companies, only two - Energas and Tabeer Energy (Mitsubishi) - submitted applications on Friday, seeking Letter of Intent (LOI) from the Port Qasim Authority (PQA) for building the third LNG terminal.
At present, two LNG terminals with a total capacity of 1.3 billion cubic feet per day (bcfd) are operational. The new terminals will be built without government guarantees.
PQA’s final date of acceptance for the LOI was October 25. Energas, a consortium led by Lucky Cement and Sapphire - is likely to win the contract.
Energas has been working with ExxonMobil in Pakistan and is a buyers’ consortium with LNG demand from independent power producers (IPPs), textile, cement, and automobile manufacturing plants.
The consortium, which also includes Halmore, plans to build the terminal in collaboration with ExxonMobil.
The successful company will have to pay a fee of $10 million and build the terminal within 24 months. Any future terminal will have to meet these conditions. This concession fee will be used to widen and deepen the existing channel.
The construction of the third terminal at Port Qasim will put some pressure on the existing terminal operators as the new terminal will be built without any financial commitments from the government.
Officials told The Express Tribune that Engro, which was operating the first LNG terminal, did not participate in bidding for the third terminal as it wanted to expand the capacity of its existing terminal. It has the required land and has planned to set up an onshore LNG terminal as well.
Turkish firm Global Energy also did not take part in the bidding process. According to sources, Global Energy has conveyed to the PQA that it had already secured an LOI in 2011 under the then LNG Policy 2011.
The company has also acquired land and has a valid licence from the Oil and Gas Regulatory Authority (Ogra). It has already conducted surveys and has a valid performance bond. Therefore, the company is working on the LNG terminal in compliance with the LNG Policy 2011.
However, private-sector investors have raised concern over government conditions. Under the new contract terms, private-sector companies will build the LNG terminal at their own risk without any government guarantee. The government, however, will collect a higher fee of $10 million.
In addition to that, the terminal building company will have to submit a performance bond worth $10 million. It will also have to give an LNG offtake guarantee for 250 million cubic feet per day and will have to submit a performance bond worth $3 million in this regard.
Published in The Express Tribune, October 27th, 2019.
Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.