ISLAMABAD:
The Asian Development Bank is set to approve $30 million loan for the construction of Engro Fast track Liquefied Natural Gas regasification project.
The project is aimed at facilitating imports of up to 400 million cubic feet of gas per day (mmcfd) gas to bridge the soaring gap between demand and supply.
The loan will be given at London Interbank Offered Rates (Libor), according to the ADB. It will help Engro Elengy Terminal (ETPL), a fully owned subsidiary of Engro Corporation, to significantly meet the total financing requirements of the project, according to the ETPL official.
The project will involve the construction and operation of LNG terminal at Port Qasim including a 24 kilometre (km) branch pipeline to transport re-gasified LNG. About 21km of the pipeline is located within the Port Qasim Authority.
The International Finance Corporation (IFC) of the World Bank is also expected to give about $30 million loan for the construction of the terminal. Out of the total cost, estimated over $100 million, ETPL will add $31 million as its equity, while the remaining 70% will be arranged from international and domestic financial institutions, according to the official.
Both IFC and ADB are expected to convert parts of their project financing into equity that will allow their representatives to sit on the Board of the company.
The terminal – originally planned to be completed in November this year – is aimed at ensuring gas flows by the upcoming winter season. However, the project is now delayed and will be completed in March, due to requisite approvals from government agencies.
The Petroleum and Natural Resources Minister Shahid Khaqan Abbasi had vowed to minimise gas load shedding in the winter season this year –a promise that is unlikely to be met as the authorities have yet to finalise a deal for its import.
The project involves the use of a floating storage and a regasification unit which will store imported LNG
and re-gasify it before transporting the gas through a 24km pipeline to the existing Sui Southern Gas Company network near Port Qasim.
Following a public tendering process in 2013, the ETPL has signed a 15-year LNG service agreement with the SSGC. The ETPL would provide the handling facility with toll charges and later increase imports to 400 mmcfd from 200 mmcfd which would be set in the beginning.
The company has already begun work on the project and has completed 15% dredging besides initiating the process to lay down the pipeline. As the international financial institutions are yet to approve the loans, the ETPL has arranged bridge financing to meet all the requirements.
The government has also initiated the process for issuing tenders for the import of gas. With the assistance of the United States Agency for International Development (USAID), the government has hired legal and commercial consultants aimed at facilitating in awarding the LNG import deal.
It has been simultaneously engaging with Qatar authorities, in addition to initiating process to issue a tender for the private parties. The country is seeking a government-to-government arrangement with Qatar but it has so far remained unable to strike a deal due to a high price demand, according to Ministry of Petroleum officials.
During the previous PPP government, Doha had offered to export LNG at a price equivalent to 14.7% of Brent crude oil rate when it was hovering around $110 per barrel in the international market. Later, Qatar pushed the price down to $17.437
per mmbtu, a 0.5% discount over the previous rate of $18.002 for the 20-year lifetime of the project.
Published in The Express Tribune, September 6th, 2014.
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What does Engro bring to the table other than political clout? Just like the Thar Coal project it has zero experience in building LNG terminals.
This is a good start for the energy-starved country where most of the projects during Dictatorship were tainted with Corruption. Some of the examples are LNG Quota Scam in 2002 and Rental Power Policy in 2006 that have stripped Billions ofRuppees from Pakistan.