Irrationally high oil price have forced the bulk
consumers especially the power producers and the transport sector to
shift from oil to natural gas which has become a fuel of choice in
The mad rush for conversion from oil to gas which
has taken over 50 percent of the energy mix in Pakistan has started
posing serious threat for the existing gas resources, which might be
unable to match the growing demand if corrective measures were not
taken at the earliest. It is the high time to develop the neglected
coal deposits in Thar, the constituency from PM Shaukat Aziz had won
the bye-election for this MNA seat.
In conformity to the pressing need find alternative
energy resources, a "Pre-Proposal Conference" was hosted by
Sui Southern Gas Company (SSGC) with a view to discuss possibility of
importing Liquefied Natural Gas (LNG) to provide a cushion to gas
supplies which has already started facing constraints reflected in
turned out requests of the two Independent Power Producers (IPPs)
seeking a guarantee for uninterrupted supply of gas at least for ten
years for power generation.
Representatives of companies who had expressed
their desire to participate in the bid for appointment of external
consultants for the company's integrated LNG import project were
present in that conference.
This project, once completed, is expected to
deliver between 300 and 500 mmcfd of natural gas to SSGC's network,
which is currently transmitting 1200 mmcfd. The objective of launching
the LNG project in Pakistan, as the management explained, was
essentially to close the emerging gap between the supply and demand of
gas, foreseen during the next 3-5 years.
Proposed to be set up either at Port Qasim
Terminal, Karachi Port Trust (KPT) area of Karachi, or at Gaddani
Beach on a BOO (Build, Own, Operate) or BOT (Build, Operate, Transfer)
basis, the project will cover a complete range of activities involving
procurement, transportation, storage and re-gasification of LNG, for
which expertise will be obtained from the most competitive sources in
the world. Major shipping companies, LNG firms, specialists in
terminal construction and consortia are expected to be involved in the
commissioning of the project.
Eleven companies representing international and
local consultants, groups of consultants, banks and other institutions
participated in the pre-proposal conference. They were briefed in
detail, by the company management, on the long-term energy plan based
on different scenarios and the need to develop alternative sources, in
view of Pakistan's depleting gas supplies. LNG is therefore expected
to play a key role in the process along with trans-national pipelines
that are also being contemplated.
The Managing Director, Munawar Baseer Ahmad, in his
opening remarks informed the audience that SSGC had, in its golden
jubilee year, achieved the distinction of becoming a million dollar
company, based on expected current year revenue.
Expressing his delight at the response to SSGC's
proposal for appointment of consultants, he stated that 24 companies
had so far expressed interest in participating in the process and
nearly half of them had chosen to attend the pre-proposal conference.
He also stated that transcripts of the proceedings of the pre-proposal
conference shall be made available to all participants within the next
few days, so that everyone derives equal benefit from it.
Meanwhile, the two gas marketing companies i.e.
SNGPL & SSGCL have declared their profits in the wake of
unprecedented increase in gas consumption in Pakistan.
Accordingly, SNGPL's earnings for the first nine
months of FY05 (July-March 2005) are estimated at Rs2.11 billion, 13%
higher as compared to Rs1.86 billion during the corresponding period
of last year.
Profitability growth is to result from the
company's ongoing capital expenditure activities along with contained
financial charges. Work on SNGPL's huge Gas Infrastructure Development
Plan (GIDP) is in progress. Capital expenditure during the prevailing
fiscal is projected at approx. Rs7 billion to be financed by a
combination of government sponsored debt and internal funding. The
earnings of SNGPL resultantly improved by 15% to Rs1.39 billion during
first half of the current financial while the capital expenditures
amounted to Rs3.38 billion.
SSGC has set an ambitious Rs36 billion capital
expenditure plan till 2008. The project is to be financed with debt
and internal funds in roughly the same proportion. This expansion
covers the Phase II of the company's Gas Infrastructure Rehabilitation
and Expansion Plan (GIREP-II). During FY04 SSGC arranged Rs3 billion
financing agreement with a consortium of banks at a cost of 0.9% above
the average six months KIBOR.
The Economic Coordination Committee (ECC) of the
Cabinet has decided that the two gas companies would be privatized in
their existing integrated form. Earlier it was the government's plan
that the Suis would be unbundled and their transmission and
distribution units would be separated. Absence of progress on this
restructuring precluded any headway on the privatization of the Suis.
The ECC has now decided that the Suis would be restructured and
privatized in their existing form. Going forward, visible progress is
expected on this front and as a first step EoIs may be called for the
strategic sale of SNGPL and SSGC.
Improved profitability prospects ensuing from
capital expenditure plans as well as the recent increase in gas prices
and possibilities of headway on the regional pipeline project bode
positively for the Suis. A positive stance is suggested on SNGPL and
SSGC's financial results for the first nine month
of the current financial year, however, portrayed a disappointing
picture. The company posted profit after tax for July-March 2005 at
Rs656 million which is 13% lower as against Rs757 million of the
previous year in the same period.