$500m secured for LNG projects

Deal with Chinese, UAE firms signals independence from govt guarantees

ISLAMABAD:

Pakistan is poised to embark on two new LNG projects, attracting a substantial $500 million in foreign investment. The China National Chemical Engineering Company (CNCEC), a leading Chinese contractor, and LNGFlex Limited, a subsidiary of Bison Energy based in the United Arab Emirates, have formalised a Master EPCF (Engineering Procurement Construction and Finance) contract for these significant liquefied natural gas (LNG) initiatives in Pakistan.

These projects mark a historic milestone as they will be the first in the country to operate without government guarantees. Construction work on Project 1 is scheduled to commence in Q4 2024, with the second Project Final Investment Decision (FID) expected in 2025.

Bison Energy is set to independently procure LNG through private imports, collaborating with international suppliers from countries such as Oman, Abu Dhabi, Australia, and Nigeria. Importantly, this strategy will be entirely independent of Pakistan LNG Limited (PLL), with no government funds allocated for the private procurement process.

In addition, Bison Energy aims to directly market the acquired gas to end customers through its dedicated marketing company, eliminating reliance on Sui Southern Gas Company (SSGC) or Sui Northern Gas Pipelines Limited (SNGPL).

design: mohsin alam

The first V-LNG project is strategically utilising Virtual trucks for supply, overcoming limitations posed by the existing SUI pipeline, which is currently operating at reduced capacity.

Earlier, the Competition Commission of Pakistan (CCP) granted approval to a UAE-based company for the acquisition of two entities: Tabeer Energy (Pvt) Ltd (TEPL) and Tabeer Energy Marketing (Pvt) Ltd (TEMPL). These companies were engaged in establishing and operating an LNG terminal, as well as the import, storage, and distribution of Liquefied Natural Gas (LNG) and re-gasified liquefied natural gas (RLNG) in Pakistan.

The CCP approved the 100% acquisition of TEPL and TEMPL by the UAE-based Bison Energy FZCO. Following the merger transactions, Bison Energy acquired the entire shareholding of TEPL and TEMPL from Diamond Gas International Japan Co Ltd.

The initial project, known as V-LNG or the Pluto project, involves establishing a “virtual pipeline supply chain.” This comprehensive initiative encompasses constructing an LNG receiving terminal, an onshore LNG storage tank area, filling facilities, and associated infrastructure within the Karachi Port area. The second undertaking, referred to as the R-LNG project or Ambush project, entails developing a long-distance gas pipeline supply chain. This includes LNG receiving terminals, gasification units, long-distance pipelines, and supporting infrastructure in the Port Qasim area of Karachi. Upon completion, the V-LNG project is projected to supply a peak capacity of 750 million cubic feet per day to the local natural gas market, as stated by CNCEC.

Read: Avenues with UAE

Under the terms of the Master EPCF contract, CNCEC will be responsible for the design, construction, and financing of both terminals. The total EPC cost is anticipated to exceed $500 million, contingent on the final designs selected by LNGFlex. Notably, LNGFlex is considering constructing onshore LNG storage tanks at its V-LNG terminal, marking a pioneering development in Pakistan.

The project aims to ensure an uninterrupted supply of LNG to customers in and around Karachi in ISO tanks, offering competitive pricing.

During the signing ceremony, Shahid Karim, Chief Executive Officer of LNGFlex, expressed excitement about reaching this historic milestone. He emphasised the transformative impact of both projects on the Pakistani energy landscape, highlighting their benefits to consumers in Pakistan without posing any risk or cost to the public and the government. Furthermore, he underscored the potential for foreign investment, job creation, and environmental improvement.

CNCEC, a part of the state-owned Sinochem Group, is recognised as the world's largest oil and gas contractor with a successful track record in developing multiple LNG terminals globally. Chairman of CNCEC, Zhou Hong, underscored the company's longstanding engagement with the Pakistani market and its commitment to the "Belt and Road" initiative. He expressed hope that the collaboration on these projects would strengthen the bonds of China-Pakistan friendship and contribute significantly to the comprehensive cooperation between the two countries.

LNGFlex, incorporated in Pakistan, aims to establish and operate LNG and integrated regasification infrastructure in the country. The company plans to source LNG from various locations such as Oman, Abu Dhabi, Australia, and Nigeria. The clientele of LNGFlex will include Pakistan's small-to-medium industrial sector, heavy transport market, and housing market.

Published in The Express Tribune, December 6^th, 2023.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.