Friday, October 30, 2015

Will Pakistan Benefit From LNG Glut Pushing Prices to New Lows?

LNG spot prices hit a new low of $4 per mmBTU as the supply continues to significantly outstrip demand. It's creating opportunities for Pakistan to get access to large supply of cheap fuel for its power generation.

With softening demand from China and 130 million tons per year (mmpta) of additional LNG supply set to reach market over the next five years, gas research firm Wood Mackenzie sees continuing downward pressure on global LNG spot prices.

LNG Price History Source: WSJ



“The entire industry is worried because it is hard to tell when China’s demand will pick up again,” said an LNG strategist at a Malaysian energy company who attended the Wood Mackenzie conference in Singapore, according to Wall Street Journal. “Rising demand from smaller countries such as Pakistan, Egypt and Bangladesh is not enough to offset the declining demand from north Asia.”

As recently as two years ago, LNG shipped to big North Asian countries like Japan and Korea sold at around $15 to $16 a million British thermal units. This month, the price has already hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia next year, to under $6 per million BTUs, as a wave of new gas supply in countries from the U.S. to Angola to Australia comes on line, according to Wall Street Journal.

Petronet LNG Ltd, India’s biggest importer of liquefied natural gas (LNG), is saving so much money buying the commodity from the spot market that it’s willing to risk penalties for breaking long-term contracts with Qatar.

This is a great opportunity for Pakistan to take advantage of historically low LNG prices to alleviate its severe load-shedding of gas and electricity.  Recently, Pakistan has launched its first LNG import terminal in Karachi and started receiving shipments from Qatar.  Pakistan has also signed a $2 billion deal with Russians to build a north-south pipeline from Gwadar to Lahore. But the country needs to rapidly build up capacity to handle imports and distribution of significant volumes of LNG needed to resolve its acute long-running energy crisis.

Here's a related video discussion:
http://dai.ly/x3ccasi



Pakistan Local Elections; Indian Hindu... by ViewpointFromOverseas


https://vimeo.com/144586144



Pakistan Local Elections; Indian Hindu Extremism; LNG Pricing; Imran-Reham Split from WBT TV on Vimeo.


https://youtu.be/LZavD-tkReg





Related Links:

Haq's Musings

Pakistan's Twin Energy Crises of Gas and Electricity

Affordable Fuel For Pakistan's Power Generation

Pakistan Shale Oil and Gas Deposits

China-Pakistan Economic Corridor 

Blackouts and Bailouts in Energy Rich Pakistan

Pakistanis Suffer Load Shedding While IPPs Profits Surge

27 comments:

Muslim said...

There is alot of confusion in Pakistan regarding LNG and that is due to some present and ex top man of one of the gas utility company.
They have created so much confusion in the transaction that every one is afraid to enter into one.
The only solution at the moment is that govt should get out of this industry privatize it and open access regime is introduced. Domestic subsidies is also killing the economy and the industry govt should do way with them

Suhail H. said...

You can now well understand the LNG scam. The LNG purchase price in Pakistan's long term contracts has not been disclosed yet but purported to be around USD 9-12 per MMBTU. With spot prices predicted to be much lower in future, there will be windfall profits for the Pakistani sponsors. Keep in mind that LNG contract with "Qatar" is not Pakistan-Qatar govt to govt (G-to-G), but with Pakistan's private entities; the impression being given by Nawaz and cronies to Pakistani public is of G-to-G contract.

Under such LNG price forecasts, no sane and honorable entity will go into long term purchase contracts. The rulers of Pakistan an exception because they're either stupid to the extent of being insane, or dishonest to the core. Probably both as they usually sell out Pakistani interests very cheap.

Anonymous said...

Suhail:

Nawaz has recently agreed with Russia to build Iranian gas pipeline in Pakistan for nearly $2.5 billion with a Pakistani company's participation at about 20% in it. This is when the Iranians already have an offer on the table for four years to build the same pipeline for about $750 million, with the entire funding provided by Iran on a very soft loan. Iranians also built themselves their own pipeline to Pakistani border, so we know that they know what they are doing.

Suhail H. said...

Shams:

The $2.5 billion G-to-G agreement with Russia is for building a Karachi to Lahore pipeline for transporting RLNG imported at Karachi. There is another G-to-G agreement under finalization with China for building an RLNG import terminal at Gwadar and a pipeline from Gwadar to Nawabshah where it will tie-in to the Karachi - Lahore RLNG pipeline. This Gwadar - Nawabshah pipeline will be tied in to the Iran pipeline if and when it comes up. The illogic here is that when Iran Pakistan pipeline comes up, LNG terminals at Gwadar and Karachi will become redundant but Pakistan will still be paying the fixed capacity charge for the terminals. If Iran Pakistan pipeline doesn't come up, Pakistan will be paying take-or-pay charges to Iran.

Can any one justify such acts which certainly will result in Pakistani gas consumers paying up for all the losses incurred because of Pakistani politicians' corrupt practices?

Riaz Haq said...

#LNG glut to steal coal market share as gas replaces #coal in power generation. #Pakistan #India #China http://reut.rs/1HdNoIQ via @Reuters

* LNG competition to cast doubt over new coal power capacity
* LNG supply to grow by 35 mln tonnes in 2016-Energy Aspects
By Sarah McFarlane
LONDON, Oct 29 (Reuters) - A wave of liquefied natural gas due to hit energy markets over the next couple of years is expected to displace tens of millions of tonnes coal demand globally, helped by government initiatives to move away from polluting power generation.
Both coal and LNG are oversupplied after higher prices during the past decade triggered investments in new projects and expansion plans. At the same time the gap between their prices has narrowed as LNG has become more competitive, particularly where governments penalise coal via taxes or emissions trading schemes.
"There is a monstrous amount of LNG coming into the market, on pure cost economics you can say coal is cheaper than LNG at any realistic price, but it's going to be used somewhere and if it is coming in the volume that's forecast, it will be displacing coal," a coal trader said.
"New coal generating capacity is less likely to be realised in a world awash with LNG."
One of the biggest factors in how much switching occurs will be what the world's largest coal consumer China does.
Environmental concerns and a desire to help financially distressed domestic coal miners has led to a dramatic fall in Chinese coal imports, with shipments down 30 percent in the first nine months of the year, compared with the same period a year ago.
Smog has emerged as a major problem for the government, which has relied on coal and highly polluting heavy industries to fuel its economic growth, especially in northern regions.
"In China, gas will be cheap, gas will be oversupplied, LNG will be oversupplied for the next 3-5 years and that will give an opportunity for policymakers to work harder to switch from coal to gas, but it will take time," said Torbjörn Törnqvist, chief executive of Swiss-based trade house Gunvor.
"Everyone in Beijing knows what the problem with coal fire stations in China is and they will go for gas."
Beyond China, Europe is also seen as a region where switching is likely to take place.
Trevor Sikorski, an analyst at consultancy Energy Aspects, said around 130 million tonnes of thermal coal was vulnerable to being replaced by gas for power generation on an annual basis in Europe.
Sikorski suggested that given the amount of new LNG projects due to come on line in the coming two years, gas prices could be low enough to encourage this level of switching by 2017.
Energy Aspects forecasts some 35 million tonnes of additional LNG supply hitting the market next year, a 16 percent increase on 2015.
Earlier this month oil and gas industry bosses again urged governments to ditch coal in favour of less polluting natural gas, which emits around half of the CO2 coal does, in power plants and heavy industry.
"LNG will continue to cannibalise the coal market, coal's not going to die, but it's hard to be bullish," said Jeffrey Landsberg, managing director of U.S. based consultancy Commodore Research. (Reporting by Sarah McFarlane, editing by David Evans)

Kadeer said...

When there is huge circular debt no additional investment can be made and one cannot take advantage of lower prices because of huge debt. Corrupt practices will hamper investment and future growth.

Riaz Haq said...

#Pakistan-#Qatar deal on #LNG purchase to be signed on November 15, 2015 https://shar.es/15sGpo via @sharethis

Qatar and Pakistan will sign historical deal for the provision of Liquefied Natural Gas (LNG) in the mid of November and immediately after that the supply of LNG to Pakistan will be started through ships.

The Jang Group has achieved the bullet points of this agreement. According to the agreement the Economic Coordination Committee of the Federal Cabinet will give approval to this 15-year deal for the purchase of LNG from Qatar at its meeting on Thursday (November 5) which will be presided over by Finance Minister Ishaq Dar. Federal Minister for Petroleum and Natural Resources Shahid Khaqan Abbasi will give briefing to the meeting regarding the LNG agreement. He will tell the meeting that Qatar will supply three million ton LNG to Pakistan through 52 ships annually. The price of the LNG will be attached to the price of Brent crude oil.

Qatar will provide 400 million cubic ft natural gas daily to Pakistan which is equal to the present production of Sui gas field. The natural gas made by LNG will be provided to nine IPPS. These nine IPPs will produce approximately 1800MW power daily through LNG.

Besides these nine IPPs the natural gas produced by this LNG will be provided to Nandipur Power Plant from March 2016 and this will decrease 25% per unit cost of production of power in Nandipur.

The natural gas produced by LNG will also be provided to fertilizer factories including Pak-Arab Fertilizer and Daud Hercules Fertilizer which would help them produce Urea fertilizer and Phosphate Urea.

This gas will also be supplied to CNG stations. Pakistan has been importing LNG from different sources including Australia, Nigeria, New Guinea, Spain and Belgium and also from Qatar since March 26, 2015.

The private sector of fertilizer has purchased three ships so far and one ship of LNG has been purchased by owners of the CNG stations.

According to the agreement Qatar will provide four ships of LNG every month. The LNG will be provided to brass and textile industries that are ready to buy LNG. The wheel of industry will start booming through such move. This will also create job opportunities for skilled, unskilled and unemployed manpower. It is also expected that gas loadshedding will decrease greatly for domestic consumers with provision of LNG to other sectors.

Riaz Haq said...

#Pakistan Minister Shahid Khaqan Abbasi finalizes $16 billion #LNG deal with #Qatar for 1.6 billion tons a year. http://af.reuters.com/article/nigeriaNews/idAFL9N0VZ00F20151109 …

DOHA Nov 9 (Reuters) - Pakistan has finalised a $16 billion liquefied natural gas (LNG) deal with supplier Qatar and shipments are expected to begin next month, Pakistani energy minister Shahid Khaqan Abbasi said on Monday.

The amount is 1.5 million tonnes per year, the minister said, adding that the two sides had agreed a price.

The two sides have agreed a price, he said without elaborating.

"We have finalised the deal. The first shipment is expected in December," he said. "We are hopeful for similar deals in the future." - Reuters

Anonymous said...

I haven’t posted for a while but decided to do so to clear some very blatant misconceptions and fears surrounding the hydraulic fracturing process (fracking) from tight rocks (shales etc).

1. Are there risks associated with fracking? Yes. But are these risks greater than other mineral mining processes? No. The environmental footprint of surface mining is probably as destructive if not worse than the dreaded fracking.
2. Basic procedure of hydraulic fracturing is pumping in high pressured polymer water mixture (aka pad) followed by propane (sand of a specific date diameter size). The other idea is to injec fluids beyond the rock fracture pressures and create a fracture matrix to increase the permeability to allow the trapped hydrocarbons to flow to the wellbore. Water polymer mixture may contain toxins as described in a post above. But more environmentally friendly frac fluid are being developed and utilized at an increasing rate.
3. The problem with fracking is that most of action is taking place subsurface which leads to speculation by environmentalists while surface mining damage is mostly visible.
4. I would recommend fracturing be banned anything above than 150 meters below Base of Groundwater. Fracking should also be restricted in areas where there are geological faults and above than normal insitu stresses. Especially close to the Himalayan range. Fracking can cause induced seismicity.
5. As long as the Caprock (the rock formation above the shale) is not penetrated (this can be done through proper frac design ie minifrac) and through proper core sample analysis, and as long as the base of groundwater is safeguarded…. Then fracking is a very viable technology.
6. True… fracking technology has been around since the 1940s…. But now they are drilling the horizontal wells which are in the shape of an L …. And the horizontal section can be over 2km long! And they are fracking that horizontal section with 20 to even +40 stages stages of fracs per well… this have been unheard of even 5 years ago.
In your analysis you state that after the production from a frac well they dispose for the frac fluid back into the same well. This could not be further from the truth. Disposal of frac fluid in the same well will be technically very difficult. Ideally disposal os into a permeable depleted reservoir where migration of fluids into another permeable zones is highly unlikely.
7. Yes, Pakistan allow shale development… but make sure you have proper regulations are in place!

Kiran said...

Yes. But you need to sign the contract, instead of just discussing it.

Riaz Haq said...

Kiran: "Yes. But you need to sign the contract, instead of just discussing it."

It's not wise to sign a long term purchase agreement when LNG prices are falling due to glut in the LNG spot market.

Pakistan should wait until the spot market price stabilizes.

Riaz Haq said...

Purchasing LNG from the government of Qatar at the rate of $8.64/mmBtu on the basis of a long-term agreement was an ill-considered and non-transparent move that our government was, until recently, ready to embark upon. Relenting to public criticism, the government has now called for bids to make the purchase. However, the big question remains.

LNG is a very expensive option for importing energy. As it comes out of the ground it first has to be cooled to minus 180 degrees centigrade to turn it into liquid form. This is a highly expensive operation. Transport of LNG from one place to another requires specialised ships, which charge high rates. For loading and unloading these ships need special terminals where the liquid gas is turned into ordinary gas for industrial and domestic use before it can be pumped into our gas pipelines. These are prohibitively energy consuming and costly processes.

Besides, there are pipeline losses along the way, not to mention transportation losses and costs. Thus a consignment that costs $8.5/mmBtu in Qatar may well cost a consumer, in say Multan, $11.5/mmBtu after taking into account all the transport costs.

We just need to look at the international index for LNG as we can find for Brent oil. There are a number of international price indices for gas. The Henry Hub in the US currently prices gas at $2.13/mmBtu, the TTF index in France and Holland currently price gas at $5.3/mmBtu in pipeline ex-France. All are considerably lower than the $8.64/mmBtu quoted in the press as import price from Qatar.

Instead of importing LNG, the most economical option would be to rely on gas in Pakistan. Currently our proven reserves are approximately 40 tcf of which some has been consumed. We also have approximately 105 tcf of unconventional shale or tight gas, and this is yet to be explored. Our neighbours Iran (1300 tcf) and Turkmenistan (600 tcf) hold the second and fourth largest gas reserves in the world (Qatar with 900 tcf has the third largest), whereas the Turkmenistan-Afghanistan-Pakistan-India (Tapi) pipeline is still at feasibility stage.

Iran has already extended its pipeline to our border and is offering gas at approximately $3.5/mmbtu to potential investors in Iran. If we add transportation costs it would cost approximately $5.5-6/mmBtu in Punjab as opposed to $11.5/mmBtu for Qatar LNG.

How much more expensive would LNG be? If we take 5,000MW as the additional installed power capacity that would run on gas, the demand for gas as fuel would be approximately 180 million mmBtu per annum. As mentioned above, the difference in cost between pipeline gas from Iran or other sources would be $5.5/mmBtu ($6/mmBtu as opposed to $11.5/mmBtu from LNG – at the power plant). Thus this would add approximately $1 billion per annum to the fuel cost or $20 billion for the lifetime of these projects. This money would be far better used for developing much needed social or physical infrastructure or for improving our security.

Is there an urgent need to sign a long-term sale agreement? Due to faulty design our lone LNG terminal cannot receive (and has not received) any LNG carriers as the approach channel needs to be deepened and widened. This will take almost one year and cost around $100m. Therefore until this is sorted out a long-term purchase agreement cannot be effective. The current ad-hoc arrangement of sending the Floating Storage Regasification Unit (FSRU) to Qatar every two weeks for refilling can easily continue at spot rates as this at best is an interim arrangement.

http://www.thenews.com.pk/Todays-News-9-353221-The-LNG-cost

Riaz Haq said...

GLOBAL #LNG-February 2015 prices dip to between $6.90-$7.00 per mmBtu as #Pakistan nears 120 cargo award http://af.reuters.com/article/energyOilNews/idAFL8N1473J620151218 …

Asian liquefied natural gas (LNG) prices eased this week as two companies emerged as the front-runners to supply Pakistan with 120 cargoes between 2016 and 2020.

The price of Asian spot cargoes for February delivery was pegged at between $6.90-$7.00 per million British thermal units (mmBtu), down from around $7.10 per mmBtu last week.

Shell and trading house Gunvor are on course to supply Pakistan with 120 cargoes after both companies submitted the lowest offers in two highly sought after tenders.

Jordan's National Electric Power Company (NEPCO) said its floating LNG import terminal was back working at full capacity after adverse weather disrupted operations earlier this month.

NEPCO declared force majeure on the terminal on Dec. 5 due to strong winds requiring it be moved away from the jetty, a spokeswoman for the company said.

Gas supplies to both Jordan and Egypt were disrupted for a few days before the plant initially resumed operation at half capacity, and then finally full capacity, the spokesperson said.

Nigerian exports of LNG are recovering after a disruption in loadings last week led to reduced flows compared with November averages.

LNG exports in November averaged 20 million tonnes/year (mt) while December is averaging just 16 mt/year, according to one industry source. (Reporting by Oleg Vukmanovic in Milan and Sarah McFarlane in London, editing by William Hardy)

Riaz Haq said...

#Pakistan's gasoline demand set for strong double digit growth, imports to rise - Oil | Platts News Article & Story http://www.platts.com/latest-news/oil/karachi/feature-pakistans-gasoline-demand-set-for-strong-26320538 …

According to estimates from the petroleum ministry, gasoline demand is expected to grow by 15% year on year to 5.3 million mt (around 39.5 million barrels) in fiscal 2015-2016 (July-June) led by low prices, non-availability of compressed natural gas and a rise in auto sales.

In 2016-17, demand is expected to rise 11% on the year to 5.9 million mt, government officials estimated.

"To compete effectively in the market and ensure timely product availability, PSO has to import more Mogas in the coming years in view of the expected increase in demand," Sheikh Imranul Haq, managing director of Pakistan State Oil, told Platts Wednesday. PSO is the largest oil marketing and distribution company in Pakistan.

"Currently we are importing on average three cargoes per month, but this can go up to four or five by next year," he said.

Of the 4.6 million mt of gasoline Pakistan consumed in the fiscal year ended June 2015, only 1.5 million mt was produced domestically, with the remaining 3.1 million mt, or 67% imported, according to ministry data.

Though Pakistan is expected to see an increase in domestic gasoline output next year, this will not be enough to compensate for the rise in demand.

The 46,000 b/d Attock Refinery will lift its gasoline production from 30,000 mt/month to 50,000 mt/month by March 2016, while the 50,000 b/d Pakistan Refinery has already doubled gasoline production from 11,000 mt/month to 22,000 mt/month.

"Since refinery production is not expected to increase drastically, PSO will have to rely on imports," Haq said.

KEY FACTORS

Lack of availability of CNG led by stagnant domestic production and delays in LNG imports has been a major factor driving up gasoline demand in the country.

Natural gas production in the country has been at standstill at 4.2 Bcf/day over the past two years, while demand has risen substantially.

The CNG sector needs around 450,000 Mcf/d of gas to meet demand, but owing to lack of gas availability and diversion to residential customers, gas supply to CNG pumps ranges between 380,000 Mcf/day to 400,000 Mcf/day, Ghaiss Abdullah Paracha, chairman of the All Pakistan CNG Association said by telephone from Islamabad.

The retail price of gasoline has fallen to Pakistan Rupees 77 ($0.6)/liter from Rupees 114/liter in November 2014 following the sharp drop in international crude oil prices.

"The surge in oil consumption hinged around the global crude price. However, the trend and international developments like OPEC maintaining the crude oil supplies indicate that low domestic price would stay for long," said Nauman Ahmad Khan, head of research at Karachi-based brokerage house Foundation Securities, adding that rising vehicle sales would also help consumption over coming years.

During the fiscal year ended June 30, 2015, car sales recorded growth of 31% year on year to 179,953 units. And in the four months to October 2015, sales shot up 67% year on year, said Muhammad Tahir Saeed, senior research analyst at Karachi based brokerage house Topline Securities.

LNG AN OPTION

Some industry officials, however, said that the growth in petroleum products demand might not be as much as estimated by the government as CNG pump owners have successfully lobbied the government to import LNG independently, instead of depending on the state run companies Pakistan State Oil and Sui Northern Gas.


Pakistan's overall oil products demand in 2014-15 period was 22 million mt, up from 21.44 million mt the previous year. In the year ending June 30, 2016, consumption is expected to rise to 22.8 million mt, while in the year ending June 2017 it would rise to 23.5 million mt, government officials estimated.

Riaz Haq said...

#Pakistan pursues multi-pronged strategy to meet energy needs: #LNG, #Iran pipeline, #TAPI. Gas demand up to 6 bcfd

http://tribune.com.pk/story/1017385/overcoming-shortfall-govt-pursuing-multi-pronged-strategy-to-meet-energy-needs/ …

Spurred by the gas demand growing to over six billion cubic feet per day (cfd) and depleting hydrocarbon resources, the government has adopted a multi-pronged strategy to ease Pakistan’s energy crisis.

It is importing liquefied natural gas (LNG) in addition to pursuing long-term projects such as the Iran-Pakistan (IP) and Turkmenistan-Afghanistan-Pakistan-India (Tapi) gas pipelines.

According to an official source, previous governments too unsuccessfully tried to import LNG. They failed because they adopted an approach where the supplier was supposed to develop an LNG terminal.

“But the present government succeeded in providing the country with its first LNG-based gas within 20 months of coming to power,” he added.

The government pursued a transparent process for developing a terminal and Engro Elengy built the SSGC LNG regasification terminal in a record time – the contract was signed on April 2014 and first gas flow was ensured in March this year.

The source said the government needed to sign five more contracts to import LNG, as currently LNG caters to 20% of the country’s needs. The government plans to build one terminal at Port Qasim and another at Gwadar port to handle over two billion cfd of LNG

On the IP project, the government has done work on its part and is awaiting only relaxation or removal of international sanctions on Iran.

The government has also recently broken ground on the Tapi project, which had lingered on for the last 25 years. According to the official, the first gas flow from Tapi is expected in December 2019.

The government has also awarded several exploration licenses to discover more hydrocarbon resources and augment domestic production which is currently stagnant at four billion cfd.

Riaz Haq said...

#Pakistan ready with last part of #LNG pipeline link to #Iran http://www.thenational.ae/business/energy/pakistan-ready-with-last-part-of-lng-pipeline-link-to-iran … via @TheNationalUAE
Pakistan is ready to complete the short final pipeline spur that would enable it to import natural gas from Iran once sanctions are lifted, according to the head of one of Pakistan’s state energy companies.

“In the very near future we expect delegations from the two countries to meet,” said Zahid Muzzafar, the chairman of Oil and Gas Development Company, which is government-controlled, but has publicly traded shares on the Karachi and London exchanges.

“Once we get the right signals from the international community and our own government’s decision we are all set to build that pipeline,” Mr Muzzafar said, referring to the expected lifting of international sanctions related to Iran’s nuclear programme that have restricted its oil and gas exports since 2011. Final clearance is expected this month.

The pipeline spur would run from Pakistan’s port city of Gwadar, where it has nearly completed its first liquefied natural gas (LNG) intake plant, to Iran’s border 80 kilometres away. Pakistan has a rapidly growing need for natural gas and is also building a pipeline from Gwadar to the middle of the country as part of a network of pipelines that will include supply via Turkmenistan–Afghanistan–Pakistan–India Pipeline, or Tapi.

Pakistan has long-term aims to be an energy transit country uch as Turkey, which connects central Asian oil and gas supplies to Europe and the rest of the world via pipelines that include the one that terminates at the Mediterranean port of Ceyhan. Pakistan’s strategy would link supplies in central Asia, including Turkmenistan, as well as Iran – which rivals Russia as the world’s largest holder of gas reserves, to the huge markets in China and India, as well as serving its own growing demand.

Mr Muzzafar said additional supplies from Iran can be linked into the system that is being developed currently, which includes a US$2.5 billion project to complete the LNG terminal at Gwadar and pipeline it 700km to Pakistan’s mid-country, terminating at Nawabasah.

First LNG cargo was bought on the spot market from Qatar. Pakistan has tendered for 60 cargoes over five years. Mr Muzzafar said, and the first successful bidders were Gunvor, a Russian-owned trading house, and Royal Dutch Shell.

The China-Pakistan Economic Corridor, a $46bn multi-pronged mega project, plans to link Gwadar, Khuzdar and other western Pakistan areas via roads, rail and pipelines to Dera Ghazi Khan, Dera Ismail Khan and Peshawar in the east, and onto the western Chinese city of Kashgar, 3,000km away.​

Riaz Haq said...

Global demand for #LNG drops on weak demand in Asia, increased production and record low prices #Pakistan

http://on.wsj.com/1RCOHKZ via @WSJ

Asia represents more than 70% of world-wide demand for LNG, but Wood Mackenzie said demand from the region’s largest buyers dropped in 2015, including a first-ever decline in shipments to China, which dropped more than 1%, after years of double-digit growth. South Korean imports of LNG fell 11% on the year and shipments to Japan, the world’s single largest market, declined 4%, the report said.

That was offset by growing demand from newer importers such as Egypt, Jordan and Pakistan, the report said.

Lower prices for LNG will likely spur increased demand from other markets, including those with under-utilized LNG import capacity, such as the Britain and continental Europe, Mr. Giles said. “New LNG [production] will compete with existing gas pipelines in the European market from suppliers like Norway and Russia,” he said.

Longer-term, lower LNG prices will prompt emerging markets outside of traditional buyers in Asia to build infrastructure needed to import LNG. It can take as little as six months to install a ship-based offshore regasification facility, Mr. Giles said.

Riaz Haq said...

Shell to lose $1billion #LNG contract as #Qatar offers #Pakistan lower price

http://tribune.com.pk/story/1027664/short-term-lng-supply-shell-to-lose-1b-contract-as-qatar-offers-lower-price/ …


Energy giant Royal Dutch Shell is going to lose a five-year liquefied natural gas (LNG) supply contract worth over $1 billion as a Qatari company has agreed to provide the commodity at a lower price to Pakistan.

Gunvor and Royal Dutch Shell had won supply contracts in response to the two tenders floated by Pakistan State Oil (PSO) a few weeks ago for bringing 120 LNG cargoes over a period of five years.

ECC likely to give green light to multibillion dollar LNG deal

Gunvor offered to bring 60 cargoes at 13.37% of Brent crude price whereas Shell quoted 13.8% of Brent crude price for another 60 cargoes.

During negotiations after the opening of bids, Qatargas agreed to match the price offered by Gunvor, which was the lowest, prompting the government to consider scrapping the contract with Shell and award it to the Qatari company.

This was disclosed in a meeting of the Economic Coordination Committee (ECC) on Wednesday this week, which approved a long-term LNG supply agreement worth $15 billion.

The ECC was told that the government would save a substantial amount by transferring the contract won by Shell to Qatar at a lower price. However, Gunvor’s contract will remain intact.

Long-term LNG supply deal still awaited

In the tenders, nine trading firms including commodities giant Vitol, Glencore, Trafigura, Marubeni and US-based Excelerate Energy had submitted bids but all were rejected.

Owing to the plunge in crude oil prices, Shell is focusing on LNG business in the world market. During the previous Pakistan Peoples Party government too, Shell had tried to strike an LNG deal with Pakistan, but failed due to a controversy over the Mashal LNG project, which landed in the Supreme Court.

Pakistan produces 4 billion cubic feet of natural gas per day (bcfd) against demand for over 6 bcfd. The government considers LNG as a fast-track source to bridge the growing energy shortfall.

The lower price offer on the part of Qatar came after Petroleum and Natural Resources Minister Shahid Khaqan Abbasi visited Doha on January 6 and sought a reduction in the LNG rate. Qatar agreed to match the price offered by Gunvor for the short-term supply contract spread over five years.

Pakistan inks LNG deal worth $16b with Qatar

Earlier, Pakistan and Qatar had finalised a long-term supply deal at 13.9% of Brent crude price. The two sides are going to sign a commercial agreement as the ECC has given the go-ahead. Reports suggested that India had struck an LNG deal with Qatar at the lowest price, but Petroleum Minister Abbasi insisted the Indian price was 20% higher compared to the rate agreed between Islamabad and Doha.

Under the proposed arrangement, the long-term LNG supply contract will be for 15 years, but it will be renegotiated after 10 years. The two sides can end the contract if they fail to develop consensus over the price.

Every three months past price of LNG would be taken to calculate the price with Qatar.

As part of the agreement, PSO will receive 1.5 million tons of LNG from Qatargas in the first year and the annual volume will be enhanced to 3 million tons from the second year.

Riaz Haq said...

#LNG price could be de-linked from #oil prices for contracts. LNG producers resist fearing further price collapse

http://www.economist.com/news/finance-and-economics/21689644-it-will-take-time-fragmented-market-verge-going-global-step?fsrc=scn/tw_ec/step_on_it …

Analysts believe that, as a result, the pricing mechanism for natural gas is on the verge of change, and that a real global market will start to emerge, adding Asian trading hubs to those in America and Europe. This should spur the spread of natural gas, the cleanest fossil fuel and one that should be in the vanguard of the battle against global warming. But producers, who fear any change will lead to a drop in prices, are set to resist. They say long-term oil-linked contracts are still needed to offset the risk of their huge investments in LNG. (Gazprom, a Russian producer, has made the same argument in Europe about pipelines.)


Long-term and cyclical shifts explain why the gap between the two fossil fuels has widened. The LNG trade has grown massively in the past decade (see map). Adrian Lunt of the Singapore Exchange says LNG now rivals iron ore as the world’s second-biggest traded commodity, after oil. In the past 40 years natural gas’s share of the energy mix has grown from 16% to more than 21%. Oil’s has shrunk. Gas generates 22% of the world’s electricity; oil only 4%. It might make more sense to tie the price of natural gas to coal, against which it competes as a power source.

Moreover, during the current decade, the outlook for gas prices has become even more bearish than for oil. Sanford C. Bernstein, a research firm, reckons global LNG supply will increase by about a third over the next three years, pushing overcapacity to about 10%. (There is far less spare capacity in the oil market.) At least $130 billion of this investment in supply is in Australia, which within a few years will overtake Qatar as the world’s largest LNG producer. America will also add to the surplus. Its first, much-delayed LNG exports are due to be shipped from the Gulf Coast in weeks.

Investment in the liquefaction trains, tankers, regasification terminals and other paraphernalia needed to ship natural gas was boosted by a surge in demand from Asia. Japan and South Korea scrambled for LNG after Japan’s Fukushima disaster in 2011 forced them to shut down nuclear reactors. China saw LNG as a way to diversify its energy sources and curb pollution from coal. Last year, however, those countries, which account for more than half of global LNG consumption, unexpectedly slammed on the brakes.

The subsequent supply glut means that the spot price of gas in Asia has plunged. Those buyers who took out long-term oil-indexed contracts when crude was much higher are suffering. Mel Ydreos of the International Gas Union, an industry body, says that Chinese firms saddled with such contracts are urging suppliers to renegotiate them. He notes that a Qatari company recently agreed to renegotiate a long-term contract with an Indian buyer, cutting the price by half.

The drop in Asian prices has brought the cost of natural gas traded in different parts of the world closer to each other. America is an outlier. Thanks to the vast supplies unleashed by the shale revolution, its Henry Hub benchmark is by far the world’s cheapest, at just over $2 per million British thermal units (MBTU). But add liquefaction and transport costs, and American LNG prices rise above $4 per MBTU. In Europe and Asia they are a dollar or two higher. A few years ago the range would have been much wider, from $5 at Henry Hub to $19 in Asia. More homogenous prices are an important step towards a globalised market, says Trevor Sikorski of Energy Aspects, a consultancy.

Riaz Haq said...

A 75% Slump in #LNG Gas Aids #Pakistan's Quest to End #Energy Crisis. #loadshedding http://bloom.bg/1Ko4N8S via @business

A 75 percent drop in liquefied natural gas prices since 2014 is just what Pakistan needed. Prime Minister Nawaz Sharif’s government is confident it will help end the nation’s energy crisis by 2018.
In three years, the South Asian nation plans to import as much as 20 million tons of the super-chilled gas annually, according to Pakistan’s Petroleum Minister Shahid Khaqan Abbasi. That’s enough to feed about 66 percent of Pakistan’s power plants that have a total capacity of 23,840 megawatts. A fuel shortage has rendered half the nation’s generators idle.
“The energy crisis will be solved before the government’s term ends in 2018,” Abbasi said in a phone interview. “When a customer comes to us asking for gas, we can say, yes, we will deliver gas to you on this date. Earlier we said there is no gas, goodbye.”
Sharif’s plan to use LNG and build coal-fired electricity plants will help textile, fertilizer and steel producers boost output and spur growth that the nation’s power regulator estimates is 3 percentage points below potential. Outages lasting 18 hours had led to street protests in Karachi as recently as June, while falling natural gas production at home forced companies such as Tuwairqi Steel Mills Ltd. to idle it’s plant.

Pakistan is going all out for LNG “as it’s become more affordable,” Vahaj Ahmed, an analyst at Exotix Partners LLP in Dubai said by phone. “This gives policy makers room to justify why they are going for it. The difference between imported and natural gas is very small now.”
About 60 million cubic feet per day of LNG imports will be reserved for textile companies that have export orders, according to the finance ministry. The industry accounts for about half of Pakistan’s total exports, which declined 14 percent in the six months to Dec. 31. Fuel pumps, which are often shut for days, will benefit from the imports in the nation that was once the world’s largest compressed natural gas market.
LNG for delivery in Northeast Asia has dropped about 75 percent since 2014, according to World Gas Intelligence data compiled by Bloomberg. Spot price of the supercooled gas is likely to trade between $4 and $5 per million British thermal unit over the next four years, Goldman Sachs Group Inc. analysts including Christian Lelong wrote in a report dated Jan. 31.
Pakistan will become one of the world’s top five buyers of LNG should the government’s plan succeed, according to Abbasi. The nation started importing LNG using a floating facility last year. Two more terminals are scheduled to be completed next year, Mobin Saulat, chief executive officer at Inter State Gas Systems told reporters last month. The nation got its first shipment last year.

The world’s top five LNG importers are Japan, South Korea, China, India and Taiwan, according to International Group of Liquefied Natural Gas Importers. Pakistan also separately agreed on a 15-year contract with Qatar.
LNG will improve diversification of Pakistan’s energy needs but its only one part of the equation, Mervyn Tang, lead analyst for Pakistan at Fitch Ratings Ltd. said in an e-mail. “Progress on multiple fronts could help foster a sustainable stable energy environment, with potential positive knock-on effects for private investment and economic growth,” he said.

Riaz Haq said...

#Qatar Clinches 15-Year Contract to Supply #LNG to #Pakistan. 20 million tons a year for 66% of power http://bloom.bg/1QVqfBB via @business

Qatar Liquefied Gas Co., the world’s biggest producer of liquefied natural gas, signed a 15-year contract to supply Pakistan State Oil Co. with 3.75 million metric tons of fuel annually, the Qatari company said.
The supplier, known as Qatargas, plans to deliver the first cargo in March, the company said Wednesday in an e-mailed statement. Qatargas didn’t disclose the contract’s value. A proposed deal with Qatar for 1.5 million tons of LNG per year was worth $16 billion, Pakistan’s Petroleum Minister Shahid Khaqan Abbasi said during a visit to Doha in November.
Pakistan plans to import as much as 20 million tons of the super-chilled gas annually, enough to feed about 66 percent of Pakistan’s power plants. A fuel shortage has idled half the nation’s generators. A 75 percent drop in LNG prices since 2014 has reduced the cost of the South Asian country’s energy needs.
Qatargas, with annual capacity of 42 million tons, will supply Pakistan State Oil from joint venture plants it operates with ExxonMobil Corp. and Total SA. Pakistan State Oil shares rose 1.7 percent, the most since Feb. 4, to close as the leading gainer by points in Karachi’s benchmark 100 share index.
Talks between Qatargas and Pakistani officials date back to 2012. Pakistan intended to buy 3 million tons of LNG per year, split between long-term and shorter contracts. The country’s state oil company decided to cancel a tender for 60 cargoes of the fuel in January.

Riaz Haq said...


#Russia to Spend Billions on #Gas Pipeline in #Pakistan. #Putin http://learningenglish.voanews.com/content/russia-to-spend-billions-on-gas-pipeline-in-pakistan/3193228.html …


Russian President Vladimir Putin is expected to visit Pakistan in the next few months to begin a gas pipeline project.

Pakistan’s Prime Minister Nawaz Sharif asked Putin to visit.

Mobin Saulat heads Inter State Gas Systems, the Pakistani company that would build the pipeline. He says Putin may visit Pakistan before June.

He says Russia is interested in the project because 200 million people live in Pakistan, and investing in the country could help Russia gain influence in other South Asian nations.

When Pakistani officials and energy experts visited Moscow recently, they met with the heads of three large Russian energy companies for the first time in more than 20 years. He says that shows Russia’s interest in Pakistani energy issues.

Saulat says he believes the pipeline is the first of many investments Russia will make in Pakistan.

Experts say both countries may have strategic and political reasons to work together on the gas pipeline project.

Pakistan has tried to form new partnerships to reduce its dependence on the United States and China.

Russia will spend about two to $2.5 billion dollars on the project. That is almost 85 percent of the cost.

The 1,100-kilometer-long pipeline will be able to transport 34 million cubic meters of gas per day throughout Pakistan from Karachi to Lahore. The first part of the project is expected to be finished in two years. The last two parts are set to be completed in 2019.

Riaz Haq said...

#Qatar puts #Iran-#Pakistan #gas deal under question. Qatar's #LNG cheaper for Pakistan than Iran gas http://en.trend.az/business/energy/2496947.html …

As Pakistan blames the sanctions imposed on Iran for delaying gas intake from this country, however a Pakistani official claims there is another reason.

Pakistani Parliamentary Secretary for Petroleum and Natural Resources Shahzadi Umerzadi Tiwana said that Qatar's LNG price is lower than the price of Iran's natural gas. that of Iran.

In particular, she mentioned the recent $16-billion deal with Qatar, saying that Qatari LNG is low priced as compared to gas that Iran would be supplying to Pakistan.

According to Pakistani sources, LNG arriving in any particular month will fetch 13.37% of the preceding three-month average price of a Brent barrel (considering the present Brent price as a proxy, that would equate to $167.5 per 1000 cubic meters).



Comparing the figure with the revenues of Tehran gas deals with Turkey and Iraq, it indicates that Iranian gas wouldn't compete with Qatari LNG on Pakistani market.

In 2014 Iran was exporting gas to Turkey at above $420 per 1000 cubic meters, but the figure plunged to $225 currently due to low oil price. Iran previously said that the price of gas for Iraq would be similar to Turkey.

The price in Qatar-Pakistan's new LNG deal is very low. For instance, Tiwana said that the average price of LNG cargos imported so far by Pakistan State Oil (PSO) is $7.8224/MMBTU (million british thermal units). Converting BTU to cubic meters, then Pakistan imports 1000 cubic meters of gas at $291.

Pakistan said on February 10 that it had signed a 15-year agreement to import up to 3.75 million tons per year of LNG, or more than 14 million cubic meters per day (mcm/d) of natural gas from Qatar.

Iran also has a contract with Islamabad to export 22 mcm/d of gas to this country, while Pakistan should have started gas intake in January 2015, but yet to start construction of pipeline on its territory.

Tiwana didn't touch upon any plan regarding the Iran-Pakistan pipeline, but said that an agreement for laying gas pipeline for bringing LNG from Karachi to Lahore had already been signed between Pakistan and Russia with worth $2 billion, projected to be completed by December 2017. The project doesn't have anything to do with Iranian gas.

On the other hand, China is planning to start the construction of another pipeline from LNG terminals in Gwadar port to power plants in Navvabshah city (Pakistan).



This rout can help the realization of Iran-Pakistan gas deal, because Gwadar port has less than 100 km distance from Iranian borders, but the low Qatari LNG price may discourage Islamabad from such a move.

Riaz Haq said...

International arbitration court rules #Iran should cut #gas price to #Turkey up to 15.8 pct. #Pakistan #Qatar #LNG http://af.reuters.com/article/energyOilNews/idAFL8N15H3CL …

Turkish Energy Minister Berat Albayrak confirmed on Tuesday that the International Chamber of Commerce (ICC) has ruled in favour of Turkey in a dispute with Iran on the gas price, ordering a cut of between 13.3 percent to 15.8 percent.
Speaking to reporters in Chile, where he is accompanying President Tayyip Erdogan on an official visit, Albayrak said the final price cut would be decided between the two parties based on the ICC's decision.
"Once this ruling takes effect, we will see a discount in (domestic) gas prices this year," he said in comments broadcast on Turkish state television TRT.

Riaz Haq said...

#Pakistan Energy Crisis Prompts #Engro to Boost #Energy Business With 2nd #LNG-fueled #Power Plant http://bloom.bg/25p6WLd via @business

Engro Corp., owner of Pakistan’s second-biggest fertilizer maker by value, plans to expand its power generation business and build a second liquefied natural gas terminal, betting a revival in economic growth will boost demand for electricity.
The Karachi-based company is looking at the possibility of constructing a 400 to 600 million cubic feet a day LNG terminal, through a partnership, for private sector companies, Chief Executive Officer Khalid Siraj Subhani, 62, said in an interview. It also plans to build a 450 megawatt LNG-fueled power plant for as much as $700 million, he said. Engro is also looking to invest overseas in energy and fertilizer after the firm sells stakes in existing businesses, he said.
“The idea is to keep expanding, there is a strong desire,” Subhani said in Karachi, Pakistan’s commercial capital. “There are so many elements we are working on, how they will materialize it depends, but the shift will happen toward energy.”
Engro is seeking to turn an energy crisis in South Asia’s second-largest economy into an opportunity as the government of Prime Minister Nawaz Sharif pushes to end shortages within two years. The nation is adding power plants with the help of Chinese investment and started importing gas last year with Engro building the nation’s first LNG terminal. Outages lasting 18 hours had led to street protests in Karachi as recently as June, while falling natural gas production at home forced companies to idle it’s plant.

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Engro is also considering investing in a fertilizer plant via a joint venture in North America or Africa, Subhani said. The target region will be identified by the year-end and the company wants to replicate a 72 megawatt power plant that it has already constructed and operate in Nigeria, with another facility planned in Africa’s largest economy and other possible projects in neighboring countries including Benin, he said.
“International projects will be less capital intensive, and rely more on our skills and expertise,” Subhani said. He would like to see its international businesses contribute about 20 percent of total revenue within 9 years.
Engro’s plan to expand abroad could be funded by selling stakes in its food, fertilizer and chemical businesses and the company may be able to raise $693 million at current prices, Danish Ali Kazmi, a senior research analyst at Alfalah Securities Ltd. in Karachi, said on May 23.
The company has also sought approval from the government to export as much as 1 million tons of fertilizer, with India being the most logical market after slowdown at home, according to Subhani.
Dutch dairy company Royal FrieslandCampina NV is conducting due diligence to buy 51 percent stake in Engro Foods Ltd. and ATS Synthetic Pvt. in Engro Polymer and Chemicals Ltd. It is also looking to sell up to 24 percent stake in Engro Fertilizers Ltd.
Engro’s shares rose 1.3 percent to 340.50 rupees, poised for their highest close since Aug. 11, at 10:48 a.m. in Karachi. This year Engro’s shares have risen 22 percent, outperforming the 12 percent gain of Pakistan’s benchmark index, the best performer in Asia after stake sale announcements. That’s despite the company’s 2015 annual 4.7 percent rise in revenue, the slowest rate in seven years.
“Fertilizer business is becoming increasingly more challenging,” said Muhammad Asim, chief investment officer at MCB-Arif Habib Savings & Investments Ltd. that manages 66 billion rupees in stocks and bonds. “Power will provide it that stability and potential to build up further.”

Riaz Haq said...

Floating liquefied natural gas terminals are key to #Pakistan’s #energy plan. #LNG http://on.wsj.com/2cqS8rj via @WSJ

Pakistan is taking on its acute energy shortage by dramatically ramping up imports of liquefied natural gas, while undertaking the longer-term goal of upgrading its energy infrastructure with new pipelines, refineries and storage facilities.

Key to Pakistan’s plan are floating terminals that will convert imported LNG into gas.

Costing less than half of building a traditional on-land terminal and faster to get up and running, the vessels anchor at ports, often on a long-term basis, and pipe gas into land-based pipeline networks, helping cash-strapped countries meet urgent energy needs. The floating import terminals have opened up new markets for LNG producers, who are under pressure from falling prices that have halved in the past two years due to a wave of new supply.


The country kick-started LNG imports in 2015, with Pakistani petrochemical and energy company Engro Corp. Ltd. leasing a floating import terminal, stationed in Karachi’s Port Qasim from where gas is piped into Pakistan’s local distribution system. A second terminal is planned for mid-2017 by a consortium led by Pakistan GasPort Ltd. Up to five such terminals are needed, said Sheikh Imran ul Haque, chief executive of the country’s biggest energy importer, Pakistan State Oil.

“Pakistan has not seen as much restructuring in its energy sector as what’s happening today in decades. And if we’re successful, there’s a potential investment of around $15 billion in refineries, pipelines, and the other projects coming in,” Mr. Haque said.


Mr. Haque said that Pakistan will be in the market within the next four months to buy around 4 million tons per year of LNG to supply its second import terminal. The LNG will most likely be purchased in a series of tenders at between 0.75-and-1.5 million tons apiece, Mr. Haque added.

Pakistan officials see LNG imports as providing fast relief.

The country of nearly 200 million people has long suffered from a lack of investment in its energy sector, causing hours of rolling supply cuts to homes and businesses daily. The U.S. Agency for International Development estimates that power shortages curb Pakistan’s economic growth by around 2% a year.

Riaz Haq said...

Next #LNG importing giant #Pakistan readies for buying spree of 600 billion cubic feet per day | ET EnergyWorld

http://energy.economictimes.indiatimes.com/news/oil-and-gas/next-lng-importing-giant-pakistan-readies-for-buying-spree/55198906

Pakistan LNG Ltd has launched a mid- and a long-term tender to purchase a combined 240 shipments of liquefied natural gas (LNG), the company said on its website, as the country emerges to become a major gas importer.

Pakistan, which can only meet around two-thirds of its gas demand, is expected to issue further tenders seeking twice as much supply to fill out remaining capacity at its new import terminal at Port Qasim, in the commercial capital Karachi, according to one Pakistani energy expert.

The mid-term tender covers a period of five years and calls for 60 shipments, while the long-term tender is for 15 years and 180 cargoes, according to information presented in the tender documents released on the company's website on Tuesday.

Suppliers must submit bids by Dec. 20.

Pakistan has ploughed billions of dollars into LNG infrastructure, including the construction of a second LNG import terminal and pipelines linking Karachi with Lahore in the Punjab region, the nation's industrial heartland.

The current crop of tenders are a small part of Pakistan's projected demand as the country works to bring two more import terminals online within the next couple of years, making it a potent force in global gas markets.

The country first began buying LNG last year and has already contracted supplies from trading firm Gunvor and Qatargas, the world's biggest LNG producer.

Cheap gas is tempting out new importers from the Middle East to Africa and Asia, helping stave off a deeper price rout hurting producers' bottom lines.

Cheaper than fuel oil and cleaner-burning than coal, LNG suits emerging economies racing to bridge electricity shortfalls and support growth on tight budgets.

The Port Qasim LNG terminal, which is due to go online in mid-2017, has a capacity of 600,000 million cubic feet per day.

"This tender is for 200 million cubic feet. That means another 400 million will need to be tendered out soon," said the industry source.

A Pakistan LNG official in September said the country was working on commercial as well as government-to-government LNG deals.