Company waiting for final approval to start imports in July
Domestic gas shortages a challenge amid rising demand
Spot LNG imports could help bring down costs
Karachi — Pakistan's Energas has sought government approval to start importing LNG cargoes from July as the country looks to buy cargoes from the spot market to plug its energy deficit, Energas CEO Anser Ahmed Khan told S&P Global Platts.
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Register Now"We are waiting for a final nod from the regulator, allowing our company to import LNG," Khan said June 26. He added that this would allow Energas to place prompt LNG cargoes into the primary capacity owned by the government, which is currently unutilized, thereby reducing the government's cash liabilities.
The company is looking to partner with ExxonMobil to bring in the cargoes, Khan added.
"Imports through the private sector can bring significant efficiencies and encourage peer-to-peer competition for the benefit of the end consumers," Khan said. "It is our understanding that the current government wants to encourage the private sector to lead. There is no better time than now where private sector can slowly help develop an efficient market for the benefit of all."
Energas was formed in 2017 as a buyers' consortium to set up the country's first and largest private LNG terminal. The project intends to provide LNG for associated businesses via a floating storage and regasification unit.
"We hope to set up the terminal with the aim to commission the same in 2022. A project of this size and nature takes substantial amount of time in securing regulatory approvals," Khan said, adding that the terminal would help meet the energy requirements of both industrial and residential consumers.
Domestic shortages
Cities like Karachi are facing severe power shortages. Consumers are subject to power cuts, ranging from two to eight hours every day, as power producers claim to be short of gas and furnace oil supplies, Khan said.
"According to our estimates, the current shortfall of gas for power generation in Karachi and other major cities in Pakistan would range between 200 MMcf/d to 300 MMcf/d", he added.
Khan said industrial power demand has picked up sharply as the lockdown, which was imposed some time back in a bid to fight the spread of the coronavirus, ended.
"The private sector has the ability to secure prompt supplies of molecules [LNG], whereas the government has to follow a set procedure of tendering that can take a minimum of 45 days to 60 days," Khan said.
He said the government has asked power projects to produce electricity on diesel due to a shortage of gas in the country. If private companies were allowed to secure LNG on a prompt basis, they could pass on significant cost benefits to end consumers.
"In today's market, power generation on diesel would cost Pakistani Rupees 18/unit while we would be able to produce electricity at about 60% less – Rupees 8/unit to be specific," Khan said.
Long-term outlook
Pakistan currently has two operational LNG terminals – Elengy Terminal, having a capacity of 600 MMcf/d, and Gasport Pakistan Ltd., also having a capacity of 600 MMcf/d. The government currently pays $500,000/d in capacity charges on a use-it-or-lose-it basis.
"Construction of more terminals would allow for greater competition but in my personal opinion, the country needs one or two additional terminals. The objective should be to support development of larger terminal capacity for current operational needs and future demand growth", Khan said.
With Pakistan turning to be one of the fastest growing LNG markets since it first started importing in 2015, with imports rising to 8.4 million mt in 2019 from 6.8 million mt in 2018, analysts say there is an urgent need to speed up import capacity expansions, which have been planned to absorb incremental inflows.
S&P Global Platts Analytics forecasts LNG imports to rise to 9.3 million mt in 2021, if Pakistan can bring in another FSRU relatively quickly. Imports are expected to exceed 17 million mt by 2025.
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June 29, 2020 at 02:09PM
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INTERVIEW: Pakistan's Energas seeks approval to start spot LNG imports - S&P Global
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