LNG deal: A welcome development
Courtesy:- Malik Muhammad Ashraf
The much awaited and badly needed LNG deal with Qatar has finally been clinched and an agreement to this effect was signed between the two countries during the visit of Prime Minister Nawaz Sharif to Qatar. The significance of the deal for an energy deficient country like Pakistan can hardly be over-emphasized. Energy is regarded as the life-line of a nation and an engine of development besides ensuring the enjoyment of comforts of the modern life to the masses, made possible by the emergence of new technologies. Sustained economic development of an energy starved country is inconceivable. Attaining energy security, therefore, is vital for propelling development and change in any country.
Pakistan being a surplus power producing country in 1997, regrettably, has become an energy-starved country simply because of criminal negligence of the sitting governments to increase the avenues of energy production in line with the existing and the future needs of the country. It is indeed mind-boggling to note that now new investments were made in the energy sector during the last 10-15 years.
However, it is satisfying to note that the PML-N government has shown unruffled and unflinching commitment to tide over the energy crisis and has made discernible and productive efforts to winch the country out of this debilitating situation, which has marred the socio-economic development of the country during the last decade.
Reportedly, under the agreement signed between Pakistan and Qatar for a period of 15 years, the latter would provide one billion worth of LNG annually to the former. The most significant aspect of the deal is that the agreed price of $5.35 per MMBTu is quite below the agreed price of $5.90 per MMBTu and $5.70 MMBTu in case of TAPI and Pak-Iran Gas pipeline respectively. The delivery of LNG is to commence immediately.
The importance of the agree arrangement can be better understood by having a look at the ground realities in regards to power generation in Pakistan. Presently more than 50% of the total energy mix of Pakistan including hyderl power, fossil fuel, nuclear and renewable, is based on natural gas. Pakistan ‘s constrained demand for natural gas is 6000 MMFCD against a supply of 4000 MMFCD and the unconstrained demand for natural gas is estimated to be 8000 MMFCD. Over the last ten years production of gas in Pakistan has remained stagnant at 4000 MMFCD and the new gas discoveries have barely kept pace with natural depletion of existing gas fields. The difficulties in completing the trans-regional gas pipeline projects like TAPI and IP, import of LNG was the only solution to the energy needs till such time there is a substantial change in the energy production mix and shift towards renewable energy resources.
LNG imports from Qatar reportedly would meet 20% gas requirements of the country. In terms of impact, it is estimated that it would help in the generation of 2000 MW of electricity at a much cheaper rate; it would revitalize the fertilizer and other industries, eliminate gas load shedding for the domestic consumers besides reviving the fortunes of the CNG industry which almost faced extinction and has not been supplied gas for the many last months. It would be pertinent to mention that in view of the shortage of gas, the previous government even mulled over the option of shutting down the CNG sector.
The PML-N government took a prudent decision to save the industry and as a result of negotiations with the All Pakistan Compressed Natural Gas Association decided to import LNG for the CNG sector. This policy initiative of the government is most sagacious and rewarding from the economic perspective. Besides protecting an investment of Rs.450 billion in the industry, it would save the existing 70,000 jobs and eventually create about one million new jobs by the time the LNG imports become effective. Supply of gas to the CNG stations would help in reducing transport fares, provide substantial savings to the users of petroleum products and play a significant role in checking the unbridled inflation, creating a healthy impact on the overall economic situation in the country.
The government has already completed one LNG terminal at Port Qasim to handle the imports and the second one is in the process of being built. The government is also contemplating to build a few more such terminals in the near future. In the short run the re-gasified LNG would be distributed through the existing distribution networks of SSGPL and SNGPL but in the long term a separate network will be constructed for the purpose as the existing network is not capable of coping with the increased demand for gas. An agreement with Russia has already been signed for the construction of a gas pipeline between Lahore and Karachi costing $2 billion. The government has also recently taken steps to revive and implement the TAPI and the required sale purchase agreements have been concluded. In the wake of lifting of sanctions against Iran, the prospects of implementing the IP Gas project have also brightened up. In this regard Pakistan and Iran already have started negotiations to finalize the modalities and other requirements. Apart from import of gas for re-energizing the closed power producing units, the government is unswervingly focused on setting up new power generation units. Under the CPEC power producing project with an accumulated power generation capacity of 10,640 MW will be completed by 2017-18. Another 6645 MWs of early harvest project in the energy sector are also on the actively promoted list.
Tackling the present energy crisis, as is evident from the foregoing facts, is undoubtedly the top priority of the PML-N government. The hall mark of the government strategy in regards to power generation is that it was putting more emphasis on renewable energy resources and increasing their contribution in the energy production mix. Setting up of projects based on indigenous coal to produce electricity, conversion of the existing plants to coal based entities and reliance on solar and wind energy are the steps in this regard. This would surely reduce the productions costs and the provision of electricity to the domestic and industrial consumer on cheaper rates than at present. As a result of the foregoing measures of the government, the country is well poised to attain energy security in the near future.
The much awaited and badly needed LNG deal with Qatar has finally been clinched and an agreement to this effect was signed between the two countries during the visit of Prime Minister Nawaz Sharif to Qatar. The significance of the deal for an energy deficient country like Pakistan can hardly be over-emphasized. Energy is regarded as the life-line of a nation and an engine of development besides ensuring the enjoyment of comforts of the modern life to the masses, made possible by the emergence of new technologies. Sustained economic development of an energy starved country is inconceivable. Attaining energy security, therefore, is vital for propelling development and change in any country.
Pakistan being a surplus power producing country in 1997, regrettably, has become an energy-starved country simply because of criminal negligence of the sitting governments to increase the avenues of energy production in line with the existing and the future needs of the country. It is indeed mind-boggling to note that now new investments were made in the energy sector during the last 10-15 years.
However, it is satisfying to note that the PML-N government has shown unruffled and unflinching commitment to tide over the energy crisis and has made discernible and productive efforts to winch the country out of this debilitating situation, which has marred the socio-economic development of the country during the last decade.
Reportedly, under the agreement signed between Pakistan and Qatar for a period of 15 years, the latter would provide one billion worth of LNG annually to the former. The most significant aspect of the deal is that the agreed price of $5.35 per MMBTu is quite below the agreed price of $5.90 per MMBTu and $5.70 MMBTu in case of TAPI and Pak-Iran Gas pipeline respectively. The delivery of LNG is to commence immediately.
The importance of the agree arrangement can be better understood by having a look at the ground realities in regards to power generation in Pakistan. Presently more than 50% of the total energy mix of Pakistan including hyderl power, fossil fuel, nuclear and renewable, is based on natural gas. Pakistan ‘s constrained demand for natural gas is 6000 MMFCD against a supply of 4000 MMFCD and the unconstrained demand for natural gas is estimated to be 8000 MMFCD. Over the last ten years production of gas in Pakistan has remained stagnant at 4000 MMFCD and the new gas discoveries have barely kept pace with natural depletion of existing gas fields. The difficulties in completing the trans-regional gas pipeline projects like TAPI and IP, import of LNG was the only solution to the energy needs till such time there is a substantial change in the energy production mix and shift towards renewable energy resources.
LNG imports from Qatar reportedly would meet 20% gas requirements of the country. In terms of impact, it is estimated that it would help in the generation of 2000 MW of electricity at a much cheaper rate; it would revitalize the fertilizer and other industries, eliminate gas load shedding for the domestic consumers besides reviving the fortunes of the CNG industry which almost faced extinction and has not been supplied gas for the many last months. It would be pertinent to mention that in view of the shortage of gas, the previous government even mulled over the option of shutting down the CNG sector.
The PML-N government took a prudent decision to save the industry and as a result of negotiations with the All Pakistan Compressed Natural Gas Association decided to import LNG for the CNG sector. This policy initiative of the government is most sagacious and rewarding from the economic perspective. Besides protecting an investment of Rs.450 billion in the industry, it would save the existing 70,000 jobs and eventually create about one million new jobs by the time the LNG imports become effective. Supply of gas to the CNG stations would help in reducing transport fares, provide substantial savings to the users of petroleum products and play a significant role in checking the unbridled inflation, creating a healthy impact on the overall economic situation in the country.
The government has already completed one LNG terminal at Port Qasim to handle the imports and the second one is in the process of being built. The government is also contemplating to build a few more such terminals in the near future. In the short run the re-gasified LNG would be distributed through the existing distribution networks of SSGPL and SNGPL but in the long term a separate network will be constructed for the purpose as the existing network is not capable of coping with the increased demand for gas. An agreement with Russia has already been signed for the construction of a gas pipeline between Lahore and Karachi costing $2 billion. The government has also recently taken steps to revive and implement the TAPI and the required sale purchase agreements have been concluded. In the wake of lifting of sanctions against Iran, the prospects of implementing the IP Gas project have also brightened up. In this regard Pakistan and Iran already have started negotiations to finalize the modalities and other requirements. Apart from import of gas for re-energizing the closed power producing units, the government is unswervingly focused on setting up new power generation units. Under the CPEC power producing project with an accumulated power generation capacity of 10,640 MW will be completed by 2017-18. Another 6645 MWs of early harvest project in the energy sector are also on the actively promoted list.
Tackling the present energy crisis, as is evident from the foregoing facts, is undoubtedly the top priority of the PML-N government. The hall mark of the government strategy in regards to power generation is that it was putting more emphasis on renewable energy resources and increasing their contribution in the energy production mix. Setting up of projects based on indigenous coal to produce electricity, conversion of the existing plants to coal based entities and reliance on solar and wind energy are the steps in this regard. This would surely reduce the productions costs and the provision of electricity to the domestic and industrial consumer on cheaper rates than at present. As a result of the foregoing measures of the government, the country is well poised to attain energy security in the near future.
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