PROGAS CNG: A SIMPLE SOLUTION TO PAKISTAN'S ENERGY NEEDS

ABBAS BILGRAMI
Managing Director, Progas Pakistan Limited

Oct 16 - 22, 2006

Progas Pakistan and its partners have been concerned over the past several years about the lack of movement in the construction of the transnational pipelines to meet the expected shortages in the supply of specifically natural gas. Pakistan is blessed with large reserves of natural gas. Some of the fields such as Sui have been in production since the 1950s but we believe that Pakistan's full hydrocarbon potential has not been fully tapped. It is very likely that within the course of the next decade, once the focus of the oil and gas industry has moved beyond the Middle East and Central Asia to Pakistan that we will find substantial gas and oil reserves. However, any such development may take up to a decade at least.

Our view at Progas has that we must look at innovative and new technologies that will be most appropriate for Pakistan's needs. Pakistan's expected natural gas shortfall of around 300 MMcfd from 2009 and growing as the current reserves are depleted can only be met by transnational pipelines and through more intensive exploration.

The application of CNG in the automotive sector is an area where there has been explosive growth in the past decade. There has also been a revolution in material sciences and the application of these new developments has been made possible by Trans Canada developing applications initially for its pipeline system in North America, but then carrying this understanding into the transportation of CNG in commercial quantities and in an economically viable fashion. The development of Gas Transport Modules (GTMs) allows for the handling of Natural Gas without conversion into LNG.

Progas has followed these developments with a great deal of interest, especially since Pakistan has a requirement for imported natural gas in the long run. Progas and its partners have been handling hydrocarbons for a number of years and seeing this potential niche we have embarked on setting up Progas CNG with a particular focus on developing the delivery capability to be able to import natural gas as CNG.

THE CNG IMPORT MODEL

The initial CNG marine handling capability Progas will be building will be able to deliver gas in parcels of 100 MMscfd and upward. The Progas LPG terminal will, after receiving the requisite clearance from the Port authorities and the regulator is modified, to be able to handle CNG. This facility will take approximately one year to complete. Extra land required for onshore storage and handling is already in the process of acquisition.

The CNG import model requires five elements to be clearly identified:

Gas supply sources
Export facility at the Loading port
Shipping
Import facility at the Receiving port
Gas buyer

There are a larger number of potential supply sources for natural gas as opposed to LNG as the size of gas reserves required is much smaller. Progas has identified two potential supply sources that are within 1200 miles, in Oman and the Persian Gulf.

The investment required at the supply end is a compression station at the port of loading and a let down station at the receiving terminal.

Since the bulk of investment in the CNG import model is in the shipping of the product, the risk of obsolescence and expensive fixed capacity having to be built, as in the case of LNG liquification and regasification plants, allows for financial and supply risks to be greatly mitigated. Since major supplier investment is not necessary in all liquefaction plants and commitments to supply of gas is much less the premium they would charge for CNG would be much less then for an LNG supply chain.

COST COMPONENTS OF THE PROJECT

The cost of a 6 7 Million MT supply train for LNG would be between US$ 2 - 4 billion. These costs coupled with the competition Pakistan will face with European and North American buyers from the suppliers in the region we expect pricing of LNG to remain above US$ 7 MMbtu for the foreseeable future. Spot deals in the LNG business unheard of a few years were closed this winter in the US$ 10 MMbtu range. Pakistan is unlikely to be able to pay these prices and therefore faces a somewhat difficult future vis-a-vis its energy security unless alternative measures are taken. These measures will include looking at alternatives such as building a CNG Terminal and its supply chain. Greater efforts need to be taken in seeking a resolution of the political reasons viz; security which are holding back production and exploration in vast parts of the country.

The Progas CNG project is expected to take about two years to be able to commence supply of 100 MMscfd and will cost around US$ 350 million and further capacity can be brought on line but this is dependent on the markets needs and can be tailor made to match the shortfall in local supply. The economic threshold for a LNG terminal viability is reached beyond 500 MMscfd and greater economies of scale are reached with supply chains of over 1Billionscf. Such a facility will take a minimum of five but most likely seven years to build. Most of the shipyards and the vendors for liquefaction, regasification and ancillary plants are fully booked for the next five years. Pakistan would once again be competing with European and North American buyers which would put us at a major disadvantage with the suppliers of LNG vessels and plants.

COMPELLING CASE FOR CNG MODEL

What is a most compelling argument in favour of the CNG model is the low cost base from which one can start coupled with the short period within which Progas CNG will be able to start supply of Natural Gas to Pakistan. Another important advantage with this project is that the bulk of the investment is in the shipping capacity. What this means is that financing such a project would be easier as the investment would not be in immoveable assets as in the case of LNG.

CNG has several applications for the Pakistan market. Most people are familiar with the CNG cylinder in the back of their Natural Gas Vehicle. Pakistan is a world leader in this technology and has nearly a million vehicles running on CNG. However the other applications that we envisage for CNG are only beginning to be implemented in Pakistan.

Recently Pakistan's first CNG based town gas project was inaugurated by President Pervaiz Musharraf at Lilla near Jhelum. This project uses conventional natural gas tankers which are about twice the cost and weight of Trans Canada's Gas Transport Modules. These GTM's are manufactured in Canada by FPC CNG Inc at its own facilities in New Brunswick. These are lightweight, robust gas transportation units that can be used in a number of versatile applications.

We foresee the use of these GTM's to be able to provide peak load shaving capability for gas utility companies, emergency stand by supply of natural gas for independent power stations and industrial estates which face gas cuts due to capacity issues within the Pakistan gas transmission system.

As illustrated by the usage of GTMs, Progas is committed with its partners in seeking appropriate and innovative solutions for Pakistan's energy needs. We are working to build technology bridges between Pakistan and Canada that will allow us to meet Pakistan's natural gas needs using new and revolutionary technologies.

LPG PRODUCED DURING DECEMBER 2005

PRODUCER

NAME OF FIELD

LPG PRODUCED (M.TONS)

OGDCL

Dhakni

572

 

Dhodak

5750

 

Kunnar

1104

 

Bobi

2500

 

Sub Total

9926

POL

Dhulian

287

 

Meyal

622

 

Pariwali

1854

 

Pindori

2379

 

Turkwal

3

 

Sub Total

5145

OPI

Ratana Mayal

62

 

Naimat Basal

1404

 

Siraj South

 0

 

Umar

 0

 

Sub Total

1466

PPL

Adhi

2133

PRL

 

1192

PARCO

 

11332

NRL

 

1481

ARL

 

851

JJVL.

 

13438

Grand Total

 

46964

Average/day

 

1514