ExxonMobil scraps LNG terminal plan

ISLAMABAD:

US energy giant ExxonMobil has scrapped a plan to establish a liquefied natural gas (LNG) terminal in Pakistan. It had partnered with a consortium of Energas Terminal (Pvt) Limited that was setting up the LNG terminal in the country.

“ExxonMobil is evaluating all appropriate steps to significantly reduce capital and operating expenses in the near term as a result of market conditions and commodity price decreases,” a company spokesperson told The Express Tribune.

“This is part of our ongoing review to find further efficiencies and strengthen the company for the future.

“The decision does not impact our Downstream and Chemical business in Pakistan, and future investment opportunities in Pakistan will be evaluated.”

ExxonMobil has exited the consortium, which means it is not part of a deal to set up the LNG terminal in Pakistan.

The Pakistan Tehreek-e-Insaf (PTI) government had allowed five companies to establish LNG terminals in Pakistan. However, the government had drawn up a policy according to which it would not give any guarantee and the companies would set up the terminals at their own risk.

ExxonMobil had returned to Pakistan after 20 years by forging a joint venture with Pakistan’s state-owned companies Government Holdings Private Limited (GHPL), Pakistan Petroleum Limited (PPL) and Oil and Gas Development Company (OGDC) for drilling an offshore well near Karachi.

That effort proved unsuccessful. However, the US energy giant later established some footprint in Pakistan and entered the LNG business by forming partnership with Energas, a consortium of companies from different industries like cement, textile and power.

ExxonMobil’s main objective for joining the consortium was to supply LNG to Pakistan.

The United States and Australia are going to emerge as big exporters of LNG to the world. The US has converted its LNG import terminals into LNG export terminals after a boom in shale oil and gas production.

Since ExxonMobil entered Pakistan, it had been facing problems. It started drilling for shale oil and gas reserves and requested the government to allot more area along the offshore belt of Karachi but the government turned down the request.

Following this, ExxonMobil had been waiting for announcement of an auction of offshore blocks by the government of Pakistan.

Even in the case of setting up the LNG terminal, ExxonMobil had faced problems as it needed to obtain security clearance for setting up the terminal.

Even though the government finally resolved the issue, ExxonMobil decided to pull out of the project.

The US trade secretary, during his visit to Pakistan, had also taken up the issue with Prime Minister Imran Khan to facilitate the US companies interested in operating in Pakistan.

The entry of private sector was aimed at opening up the LNG business for further growth.

At present, two LNG terminals with total capacity of 1.3 billion cubic feet per day (bcfd) are handling imports to meet domestic needs. Pakistan needs more LNG terminals to meet rising demand for gas. Mitsubishi is also working to set up an LNG terminal in Pakistan.

According to government estimates, the country needs more terminals to import 3 billion cubic feet of gas per day in coming years. The government says local gas production is depleting fast at the pace of 6% per year. So, the country needs more LNG imports to meet the gas requirement in coming years.

Moreover, now that the government has opened LNG imports for the private sector, the country needs more LNG terminals.

Published in The Express Tribune, October 30^th, 2020.

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