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Pakistani investors aim for LNG import terminal in early 2019

Three Pakistani industrial groups plan to begin importing liquefied natural gas (LNG) through a private terminal due to be completed in early 2019, bringing the total number of potential LNG import projects in the country to eight.

Currently, Pakistan has only one active LNG import terminal at Port Qasim in Karachi but is seen by traders and suppliers as a major growth market key to soaking up a growing glut of the fuel on international markets.

Yunus Brothers Group, Sapphire Group and the private backers of Pakistan’s Halmore Power Generation Co are co-funding the Energas terminal to supply their power plants, cement, auto and chemical factories, and textile mills with about 2.1 million tonnes of LNG per year.

The terminal at Port Qasim in Karachi will include a floating storage and regasification unit (FSRU), converting the LNG back into gas for feeding into Pakistan’s pipeline grid.

“Energas is a buyers-only consortium, pooling demand together to secure long-term LNG supply on preferential terms,” Energas Chief Executive Anser Khan said.

Two further power generating companies are in talks to join the consortium, which expects to cut the running costs of its power plant fleet by switching away from burning diesel to cheaper, less polluting gas.

“Energas is currently engaged in talks to secure a 15-year LNG supply deal,” Khan said.

As electricity producers, Energas’ three investors hold long-term power purchase agreements with the government, potentially making them attractive for LNG suppliers wary of emerging markets’ heightened credit and non-payment risks.

Energas does not yet have government approvals.

K-ELECTRIC TENDER

A challenge facing some of Pakistan’s proposed import projects is a lack of end-user demand needed to underpin investments in terminal infrastructure and LNG supply, industry sources said.

As a result, Karachi utility K-Electric’s tender to secure 1 million tonnes of LNG annually for 15 years drew heavy interest from competing terminal developers hoping to lock-in a major customer.

Last Friday K-Electric took bids from only three pre-qualified import project developers seeking to supply the utility with LNG, according to two industry sources.

The Engro-led project – due to start in late 2018 – comprising Royal Dutch Shell, Fatima Group and trading house Gunvor submitted a bid.

As did Pakistan GasPort (PGP), which opens in November. Trader Trafigura has access to a share of that project’s 750 million cubic feet/day of regasification capacity, but it also plans to open another terminal alongside it.

The third K-Electric bidder was the Global Energy Infrastructure-led project – also set to start in late 2018 – made up of Exxon Mobil, Total, Mitsubishi and Qatar Petroleum, the sources said.

Securing a utility customer would help underpin at least two of the projects. PGP has already locked in most of its demand via deals to supply three state-owned power plants.

K-Electric expects to pick a winner in October although this could be delayed pending a government decision to approve its tariff, industry sources said.

Two more terminal projects have been proposed – one near Karachi and another in port city Gwadar.
Source: Reuters (Additinal reporting by Drazen Jorgic, editing by Elaine Hardcastle)

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