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LNG – a more economic source of energy than other products

Economic growth and cost-effective energy availability are embedded. Pakistan’s energy import bill has by and large been approximately $15 billion per year. The perennial conundrum of energy scarcity has beleaguered the economy of Pakistan for more or less two decades. Multifarious approaches were adopted by the erstwhile governments to address this issue in vain. It is imperative to ensure the availability of cost effective energy for sustainable economic growth. Recent development augur well for Pakistan since the Thar coal is being used for the electricity generation and there are news about the splendid oil discovery in Karachi, which is the largest city of the energy-rich Sindh. Pakistan needs ample quantity of gas to cater to the domestic consumers, industry, power generation entities, fertilizer plants etc.

There is upward spike in the demand for liquefied natural gas in the country. Pakistan imported more or less 7 million tonnes of LNG last year and there is every likelihood of dramatic surge in the demand in the days to come. There are estimates that Pakistan may have to, in a couple of years, import double or triple of the current quantity to cater to the precipitous increase in demand of the commodity.

It was in 2013 when a decision was taken by the then government to import LNG from Qatar with a long-term agreement of 15 years at a price equivalent to 13.39 percent of international benchmark crude oil to address the acute shortage of gas. It was also decided that LNG will initially be provided to Kot Addu Power Company and four power plants in Punjab for power generation since economy was snagged with acute electricity shortfall. The then Federal Minister for Petroleum and Natural Resources was of the view that the country needs to reduce its reliance on costly, imported diesel fuel for electricity generation. The relevant authorities claimed the power generation cost through LNG will reduce by 40% as compared to diesel. LNG was presented as substitute for costly imported fuel and it was also claimed that there would be saving of over one billion US dollars through this step. This decision became controversial since a corruption scandal emerged. A political party in 2013 termed the LNG import deal a mega scam saying that it would cost the national exchequer Rs18 billion every year for 20 years. The same political party also claimed that Pakistan would have to ‘take or pay’ for the committed LNG irrespective of the country’s ability to lift or not.

 

At present, Pakistan imports about 600mmcfd LNG from Doha. Pakistan’s gas demand is surging and there are expectations of additional gas demand of over 1.2 billion cubic feet per day (bcfd) by 2020 winters which calls for immediate actions at this juncture. There is no misgiving about the view that the demand for natural gas will further increase in the coming years. Moreover, two terminals are functional and the incumbent government needs to ensure the operation of the third LNG terminal prior to the onset of the 2020 winters for the smooth supply and availability of the commodity. There are concerns regarding the existing two LNG terminals at the Port Qasim since they are costing the government an enormous amount even if no processing takes place which is a massive drain on the government coffers. However the cost-benefit ratio is to be considered when taking decisions for short and long term. There is a likelihood that the government would let the private sector participate, which was unlikely previously, for the private sector terminal since there seems a plenty of interest by some national and multinational firms namely Shell, Engro, ExxonMobil, Energas, Gasport, Trifugura, Mitsubi­shi and Global in this regard.

Pakistan has been importing LNG for a couple of years. The country along with its indigenous resources would have to look towards the UAE, Saudi Arabia, Iran and Qatar in the not-too-distant future since these countries have massive gas reserves. Saudi Arabia and some other countries have exhibited interest for the supply of LNG to Pakistan.

There is every likelihood that Pakistan being one of the biggest consumers of LNG, with burgeoning population and surging demand from the industry, would import in substantial quantity which might help Pakistan in terms of negotiating the price with the hope of low LNG prices for the end-users in the country. Those criticizing Pakistan for the use of coal for electricity generation must know that Pakistan has always played a vital role in terms of environment protection.

CNG, a clean fuel, was introduced to Pakistan in the 1990s. According to the Economic Survey (2010-2011), Pakistan became the world’s largest user of CNG, overtaking Iran, Argentina and Brazil. There is a perspective that LNG is a more economic source of energy when compared to LPG and the black products such as oil and diesel. LNG is the cleanest fossil fuel and is considered by some as energy of the future. Pakistan might opt for more use of LNG in the future particularly for industry, power generation and transport whereby actively contributing to protecting the environment.

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