Business

LNG import project: Govt to accept bid at 80% of oil price

Company setting up floating storage may be offered 50 cents per unit.

Zafar Bhutta July 15, 2011

ISLAMABAD:

The government has decided to accept bids of those Liquefied Natural Gas (LNG) suppliers that supply it at 80 per cent the price of crude and furnace oil. Amid growing fears of a hike in global oil prices, the government is seeking import of a cheaper source of energy.

“The government is set to offer 50 cents per Million British Thermal Unit (MMBTU) charges to the company which would set up LNG floating storage and re-gasification units (FSRUs),” sources told The Express Tribune.

After Mashal LNG project was shelved, Sui Southern Gas Company Limited (SSGC) retendered and received expressions of interest from 17 companies in developing their own LNG floating storage and supplying of LNG.

Under the Mashal LNG project, the government had offered a rate of one dollar per mmbtu for FSRUs facility. The project was shelved due to allegations of embezzlement. The petroleum ministry is currently determined to work on short-term LNG import projects and not long-term projects.

Establishing the LNG import facility and re-gasification units is expected to cost between $250 million to $300 million.

Minister for use of LNG in auto industry

Minister for Petroleum Dr Asim Hussain has also offered the CNG industry to work out possibilities to set up LNG units at auto stations. CNG industry officials at a recently held meeting with the minister assured that LNG can be possibly utilised by installing compressors at auto stations.

However, some officials argue that LNG will not be a cheaper source of energy for use in auto stations. Officials believe that its better use will be in power generation that is being already heavily relying on the expensive furnace oil.

The share of gas, coal and nuclear is less comparatively much less than furnace oil in power generation.

The government also plans to use gas to be imported from Iran for power generation purposes, which is expected to be costly for domestic and commercial gas consumers.

Based on $40 crude oil price, the cost of nuclear-based power generation is 4.1 cents/Kwh, 8.8 cents from imported gas, 8.8 cents from Thar coal, 9 cents from imported coal, 10 cents from oil and 12 cents from wind source, according to estimates.

Seventeen companies that submitted their interest in the project are Shell Gas and Power Developments BV, 4Gas Asia, Granada Group of Companies, NatGas, BW Fleet Management AS, MTMKN Group, Global Energy Infrastructure Limited, Pakistan Gasport Limited, Kot Addu Power Company Limited, PK Energy, Vitol, Engro Corp, SAF International, LNG Energy Limited, Iran Liquefied Gas Company, Trading Enterprises (Pvt) Limited and Xpro Energy Limited.

Published in The Express Tribune, July 15^th, 2011.

COMMENTS (1)

Sheikh Amin | 12 years ago | Reply LNG or simply L-CNG ( LNG to CNG ) , is practical and viable for all sectors. The auto-sector can specially benefit in more than one ways. LNG can be transported on tankers (cryogenic, like we see white tankers for liquid oxygen). So it does not need pipeline to be laid / available. Secondly, the conventional CNG stations have compressors, which generate compressed gas and heat. During summer the compressors fail to fulfill demand. They need extra cooling. The capital / initial costs of L-CNG can be well offset against the shut-downs we are experiencing. L-CNG does not need compressor, rather slight heat to vaporize and convert to CNG. Thirdly, these CNG stations are consuming huge electricity, whereas L-CNG uses less.

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