Friday, February 19, 2016

Can Pakistan Use Qatar LNG Price Leverage For Better Iran Gas Deal?

Pakistan has recently negotiated a good bargain with Qatar for importing $16 billion worth of liquified natural gas (LNG).

Pakistan will import as much as 20 million tons of the super-chilled gas annually from various sources including Qatar, enough to fuel about two-thirds of Pakistan’s power plants. Gas shortage has idled half the nation’s generators. A 75 percent drop in LNG prices since 2014 has  dramatically reduced the cost of the South Asian country’s energy needs, according to a Bloomberg report.

LNG arriving in Pakistan from Qatar 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), according to a report in Azerbaijan's Trend News.  It translates to $4.50 per million BTUs.

A comparison with Iran's gas deals with Turkey and Iraq indicates that Iranian gas will not be competitive 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, or $6 per million BTUs, currently due to low oil price. Iran previously said that the price of gas for Iraq would be similar to Turkey's price.

International Chamber of Commerce (ICC) arbitration court has recently ordered Iran to reduce its gas price to Turkey by 15% after Turkey complained. It's not clear if Iran will comply but even if it does, its price will still be $5.10 per million BTUs, much higher than the Qatari LNG price of $4.50 per million BTUs for Pakistan.

As recently as two years ago, LNG shipped to big North Asian consumer like Japan and Korea sold at around $15 to $16 a million British thermal units. Late last year, the price hit $6.65 a million BTUs, down 12% from September, according to research firm Energy Aspects. It expects prices to fall further in Asia this 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.

Will Pakistan be able to negotiate a better price with Iran? It seems difficult given the fact that Iranians have a reputation of being very difficult to deal with. Here's an excerpt about Iranians' negotiating style from Iranian-American author Vali Nasr's book "The Dispensable Nation":

"I remember a conversation in 2006 with Jack Straw, who was then Britain’s foreign secretary, about his time talking to Iran. He said, People think North Koreans are difficult to negotiate with. Let me tell you, your countrymen [Iranians] are the most difficult people to negotiate with. Imagine buying a car. You negotiate for a whole month over the price and terms of the deal. You reach an agreement and go to pick up the car. You see it has no tires. “But the tires were not part of the discussion,” the seller says. “We negotiated over the car.” You have to start all over again, now wondering whether you have to worry about the metal rim, screws, or any other unknown part of the car. That should give you a sense of what talking to Iran looks like".

Source: US EIA
Regardless of whether Pakistan succeeds in using Qatar price leverage with Iran. it's good to see Pakistan finally beginning to take advantage of historic low gas prices to alleviate its severe load-shedding of gas and electricity.

Growing Demand-Supply Gap in Pakistan

In addition to signing the Qatar LNG deal, 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:

Pakistan Local Elections; Indian Hindu... by ViewpointFromOverseas

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

Related Links:

Haq's Musings

Can Pakistan Take Advantage of Historic Low LNG Prices?

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


Anonymous said...

Under the (LNG) agreement (with Qatar), the LNG price with QG2 could be reviewed once, after the 10th anniversary of the start date. In case of failure of price review, either party could terminate the agreement with effect from the end of the contract year in which the termination notice was served. Simply put, the minimum supply period under the agreement would not be less than 11 years.
The price agreed for each LNG cargo discharged in a particular month is 13.37pc of preceding three month average of Brent value. Annual contract LNG quantity for first year (2016) would be prorate of 2.25m tons and first quarter of 2017 after which the quantity would be increased to 3.75m tons per annum beginning second quarter of 2017.
The long-term agreement also provides for annual upward and downward flexibilities of up to three LNG cargoes per contract year. Downward flexibility can be accumulated for two contract years. Under the ‘take or pay’ clause of the agreement, Pakistan is required to take full contracted LNG or else pay full cost even if it fails to receive LNG quantities for any reason. The PSO would be required to make full payment 15 days after the completion of LNG unloading.
In order to ensure that the payment is made within 15 days, the PSO would provide Standby Letter of Credit to Qatargas at 105pc of the value of four LNG cargoes during the first year. From second year onwards, the PSO would provide the letter of credit of 105pc of the value of six cargoes.
The government said it had also carried out a price comparison of all long-term gas import options, including previous LNG import attempts at indicative Brent price of $40 per barrel, suggesting that LNG import from Qatar would be the lowest.

It said the delivery ex-ship price of LNG under the Mashal Project terminated following court disputes at $40 per barrel worked out at $6.94 per MMBTU.

The price of integrated LNG import project at $40 Brent (Current Price is $30) was calculated at $6.01 per MMBTU ( Current $4.50 per MMBTU ).

Qatar had last offered $6.56 per MMBTU at Brent price of $40 per barrel while the current price is $5.35.
Compared with the natural gas import options, the government claimed the delivery price at border under the Iran-Pakistan gas pipeline was $5.70 per MMBTU at $40 Brent price and that of Turkmenistan-Afghanistan-Pakistan-India was $5.90.

Shakeel said...

No... Pakistan officials have received their kick-backs. No need to renegotiate at a better price...

Ch. Haroon said...

Spreading Knowledge and facts based on tangible support of narratives advanced by different individuals is a great service to Humanity. Sir May God bless you & your parents for the great service. We are supposed to have loyalty with Pakistan First and no matter who brings benefits.

Faisal T. said...

IP was, is and will always be the best option

Riaz Haq said...

Faisal T: "IP was, is and will always be the best option"

Qatar deal is better in terms of price. Qatar gas is significantly cheaper than the price Iran is charging its customers Turkey and Iraq. Please read the article for data.

Mehdi said...

Spot prices and long term contract prices in today's depressed oil market are different. Spot which Iran is charging Turkey and Iraq, as is Qatar, and long term contract price which Pakistan has signed is lower.....TODAY. As oil price rises this price will also go up and eventually Pakistan will be buying this at a price which will break the bank and our back. No Asian country except of course stupid Pakistan is signing long term. LNG contracts as stated in this Bloomberg report. Had Pakistan negotiated with Iran, even on a long term contract for LNG supply, though not advisable given the current glut, but had they, the contracted price would have been lower than with QG2. It's a tale of very sordid corruption in which Nawaz Sharif, Ishaq Dar and Khaqan Abbassi are direct beneficiaries, beautifully masterminded by Saif ur Rehman of REDCO. And look at the travesty. It is only after the Qatar deal is signed, that two weeks later Pakistan lifts sanctions against Iran, when European countries and the USA did it a month ago. Primarily to quickly sign the deal so that the Iranian option is closed.

Riaz Haq said...

Mehdi: "Spot which Iran is charging Turkey and Iraq, as is Qatar, and long term contract price which Pakistan has signed is lower.....TODAY. As oil price rises this price will also go up and eventually Pakistan will be buying this at a price which will break the bank and our back. No Asian country except of course stupid Pakistan is signing long term. "

Iran is not charging Turkey spot prices. Unlike LNG, pipeline gas doesn't sell on spot market.

Please read my post carefully. Pakistan's long term contract with Qatar is not for a fixed price. It sets the price at 13.37% of the preceding 3 month avg price for Brent crude barrel price. Pakistan will be able to take advantage of any further reductions in oil prices

Given the glut and new sources coming online, oil and gas prices will remain low for a very long time. Shale and new conventional oil and gas discoveries as well focus on renewables have fundamentally changed the fossil fuel business in favor of buyers. Oil rich countries like Iran and Saudi Arabia and OPEC no longer control the global energy monopoly.

Pakistan should not care about what others are doing or not doing. Pakistan should do what is in its best interest to solve the huge energy crisis we have

Mehdi said...

Give me a number for oil prices. Lower is not a number. I know this subject. I've been researching this for a long time. It's fixed as a % of Brent. 13.37% to be exact. Where do you think oil prices will be in 2, 4, 7, 9, 10, 12, 15 years from now. We will face the same incredibly finacial disaster when we signed a similar indexed pricing with the power companies during the PPP regime. This is a foolhardy and totally corrupt laden agreement. All regulatory agencies including OGRA has dissented. No discussion in parliament. No transparency on negotiations and alternate options. This is a sell out.

Riaz Haq said...

Mehdi: "Give me a number for oil prices. Lower is not a number. ...We will face the same incredibly finacial disaster when we signed a similar indexed pricing with the power companies during the PPP regime. "

No one can give you an exact future price for oil or gas.It makes no sense. The important thing is supply/demand trends that favor lower prices

There's absolutely no comparison between Qatar LNG deal and PPP's IPP contracts signed in 1990s which were cost plus contracts guaranteeing huge profits for IPPs. Please read the following to understand IPP issue:

Mehdi said...

Let me give you three reasons why this deal was struck. 1. To abort the Iran deal and placate our brotherly Saudi Arabia. 2. To line their pockets. 3. A very short term, short sighted, self centered decision to quickly bring gas into the country to avoid shortage and help them in the 2018 elections. Period. It wasn't a deal which was based on any long term thinking. Ultimately a Lohar is a Lohar. I know it's a cheap shot. But Nawaz Sharif and especially Ishaq Dar are anything but long term. They govern on a daily wages basis to fill their own coffers so they can "buy" the next election. Pakistan is like their personal Rakhael. Unfortunately. We can put as much perfume on a pile of crap but it will still stink and this stinks sir Riaz Haq saheb. It stinks. Mark my words. This will come to haunt us. Sadly.

Riaz Haq said...

Mehdi: "To abort the Iran deal and placate our brotherly Saudi Arabia. ..A very short term, short sighted, self centered decision to quickly bring gas into the country to avoid shortage and help them in the 2018 elections. Period. It wasn't a deal which was based on any long term thinking. Ultimately a Lohar is a Lohar. I know it's a cheap shot. But Nawaz Sharif and especially Ishaq Dar are anything but long term. They govern on a daily wages basis to fill their own coffers so they can "buy" the next election. "

I prefer to see the gas deal on its own merit, not through a political or sectarian lens. I'm no fan of the Sharifs or the Qararis.

Riaz Haq said...

The All Pakistan Compressed Natural Gas Association (APCNGA) has finalised the modalities with Sui Northern Gas Pipelines Limited (SNGPL) to import liquefied natural gas (LNG) to provide cheap and environment-friendly fuel to motorists.

“Although, the government has allowed the association to import LNG but we have the plan to get it through SNGPL for which almost all modalities have been finalised with the company,” APCNGA Chairman Ghiyas Abdullah Paracha told APP on Wednesday.

He said 1,300 CNG stations operating in Punjab had so far shown willingness to get LNG through SNGPL’s distribution system and expressed confidence that the CNG sector would achieve ‘complete revival’ after the imported gas.

The chairman was of the view that there should be an effective mechanism to pass on maximum benefits to consumers of the recently-signed deal with Qatar in which the government got succeeded to import LNG at the competitive rate.

With regard to the proposed deal between the APCNGA and the SNGPL, Paracha said: “The LNG price for CNG sector should be market-oriented to run the sector effectively on long-term basis,” he added.

The APCNGA, Paracha said, had negotiated with the SNGPL as per vision of Prime Minister Nawaz Sharif that private sector should also come up for the LNG import, and promote the trend in industrial sector for creating an atmosphere of competitiveness.

He said the CNG was an environment-friendly fuel and claimed that it was 30 per cent cheaper as compared to petrol at the existing rates, adding that the CNG was being sold at Rs 53 per litre and Rs 82 per kilogram.

Answering a question, he said the purpose behind selling the CNG in litre was to do its comparison with petrol so that consumers could feel the difference. But, he said, efforts would be made to end the prevailing CNG price disparity in provinces and bring its prices to Rs 47per litre from Rs 53 in consultation with the government.

“Efforts of the association with regard to LNG import will be in the practical form, hopefully, in the current month, and the number of LPG-based CNG outlets will increase from 911 to 1,500 instantly,” he remarked. Replying to a question, Paracha said the APCNGA had applied for the marketing licence with Oil and Gas Regulatory Authority and it would be issued to the association soon.

Riaz Haq said...

#Tarbela 4th and 5th extension projects to add 2820 MW to system: #Pakistan Minister - #renewables #cleanenergy …

Minister of State for Water and Power Chaudhry Abid Sher Ali has stated that Tarbela 4th and 5th extension power projects will add 2820 Mega Watt (MW) low cost hydel electricity to the national grid system.

Addressing the APP in Islamabad, the minister expressed that both projects in Tarbela would improve the current generation capacity of 3478 MW to 6298 MW. At the same time, 49 per cent work on Tarbela 4th generation extension project has been completed and the project would begin supplying 1410 MW to the national grid system in July 2017.

Furthermore, the 5th extension power project would also add another 1410 MW to the system, the minister added.
With regard to the 4th extension power project, the minister expressed that the project was expected to complete in 2018, but on the direct orders of Prime Minister Nawaz Sharif, the project will be operational by June 2017.

The World Bank has offered financial assistance to the total cost of the project which is $ 929 million.
On the other hand, the layout and design plan for the 5th extension power project had already been completed at a cost of $ 2.9 million. “It will complete in a 39-month period once work starts on it. The project would be commissioned in March 2020,” he added.

“By the end of December 2017, the remaining three units having capacity to generate 242 MW each would start supplying electricity to national grid,” Abid Sher Ali added.
In Pakistan, there has been an enormous increase in the demand of energy as a result of industrial development and population growth, compared to the enhancements in energy production. Therefore the supply of energy is falling behind the actual demand.

For years, the matter of balancing Pakistan’s supply against the demand for electricity has remained a largely unresolved matter. The country faces big challenges in altering its networks that are responsible for the supply of electricity. Electricity generation in Pakistan has shrunk by up to 50% in the recent years, primarily because Pakistan’s energy infrastructure is not well developed; rather, it is considered to be under- developed and poorly managed.

Pakistan needs around 15,000 to 20,000 MW electricity per day, however, currently it is able to produce only 11,500 MW per day hence there is a shortfall of about 4000 to 9000 MW per day.
Over the years, there is a greater need of energy because there is a notable increase in population. According to the economic survey of Pakistan 2010-11, the total population of Pakistan is 177.1 million against the 173.5 million in last year. Population growth rate is 2.1 % and in the list of most populous countries, Pakistan is at 6th number. At the same time, Pakistan has higher-than-average population growth rate n South Asia.

Energy crisis has, more or less, plagued all sectors of Pakistan’s machinery ranging from economy to industry, agriculture to social life, inflation to poverty and it is hampering national progress in a drastic manner. Nonetheless, menace of energy crisis can be overwhelmed by government working towards effective policies and its implementation. Simultaneously, it is also the responsibility of the people to utilize the available energy wisely to play our role for the progress of our nation.

Aly said...

Also, we are not incorporating one very important factor that a large portion of the deal is self liquidating. In the sense that it additionally creates 100,000 job permits in qatar. So, in that case if average inward remittance from each individual is 1000 AED per month, it makes 1.2 billion AED per year of inward remittance. Which offsets a significant portion of payment pakistan has to pay yearly to qatar for compensation of LNG.
Also, sir please incorporate one additional analysis (I really am looking forward to it). Port handling charges for each ship load has been restricted at $320,000 whereas pakistan originally charges $750,000 for handling of such ships at port qasim. Now the question is, if we incorporate those $430,000 lost revenue per ship cargo in the cost, what does the MMBTU cost comes too. Its the most important piece of puzzle every important analysis on the subject is over looking.
Also, can you please do a comparative analysis on new solar tariff for solar energy projects commissioning in 2016 & onward at 8.36 per watt for southern pakistan (From sindh till multan)? How competetive is it as compared to the india?

Riaz Haq said...

World's Largest #LNG ship with 216,000 cubic meters from #Qatar docks at Port Qasim in #Karachi #Pakistan …

The first-ever ship of Liquified Natural Gas (LNG), after reaching an agreement between Pakistan and Qatar on LNG import last month, entered Pakistan’s maritime economic zone and was docked at Elengy Terminal at Port Qasim, Tuesday evening.

The Qatari ship is the largest vessel carrying LNG to Elengy Terminal and is one of the largest ships anchored at Port Qasim.

Its capacity is 216,000 cubic metres, said Elengy Terminal statement here.

After docking, the LNG ship was hooked up with FSRU Unit of Elengy Terminal for re-filling of gas process.

The ship would remain hooked up at the Elengy Terminal for two days till the process of re-gasification in pipeline is completed.

The next LNG ship from Qatar is scheduled to arrive at Port Qasim on March 8, 2016.

The Engro’s Elengy Terminal capacity has been enhanced to 400 mm CEFD, the statement said

Riaz Haq said...

#Pakistan #China to interconnect national grids as Pak becomes #electricity surplus nation in next 3 years. #CPEC …

The Ministry of Water and Power and the State Grid Corporation of China are working closely to build an interconnecting electricity grid between the two countries to enable them to utilise each other’s energy potential.

Water and Power Secretary Muhammad Younus Dagha stated this at the Global Energy Interconnection Conference in Beijing where more than 700 delegates were present.

According to a statement issued by the ministry, the secretary said the building of the interconnecting grid would allow Pakistan to meet its growing energy demand according to the requirement.

On the other hand, China will benefit from the clean energy potential in Pakistan, especially the hydroelectric power generation along the Indus River cascade, which is on the route of the China-Pakistan Economic Corridor.

Dagha said Pakistan was very much positioned to become an energy corridor for the region and facilitate the exchange of clean energy in South Asia, Central Asia, the Middle East and China. Speaking about the Central Asia-South Asia (Casa) 1,000 power supply project, Dagha stressed that Pakistan had a unique geographical position as it was strategically located at the confluence of South Asia, Central Asia, the Middle East and China.

He noted that Pakistan was moving fast to bridge the deficit and become an energy-surplus country in the next three years.

“We hope to become self-sufficient in power generation by 2018, still we will be left with an untapped potential of more than 60,000 megawatts of hydroelectric power,,” he said.

Pakistan also has an untapped potential for more than 90,000MW of wind power in its south and an unlimited solar power potential across 850,000 square km of its area.

Riaz Haq said...

#Iran envoy in #Delhi accuses #US, #India #LNG industry of blocking #Iran-#Pakistan-#India #gas pipeline project …

Iranian ambassador Gholamreza Ansari also stressed that the "Americans will not let it happen".

"Those who have invested in the LNG (liquified petroleum gas) projects in India will not allow the pipeline venture to take off, he said at a media interaction at the Foreign Correspondnets' Club here Thursday evening..

"People who have invested in LNG in India, I don't think they will let any pipes to come in," he said.

"Americans are looking for the Indian market for the future and any sort of pipeline will put and end to these investments. So, I don't think pipeline can be a serious project. I am sure Americans will not let this project go ahead," he added.

He said that the Chabahar port project that will open up access to central Asia has been almost finalised.

"It has almost been finalised. Only the signatures at the ministerial level is due," he said.

Riaz Haq said...

#Pakistan Seals Major Deal for 75,000 tons of #LPG with #Iran | … #oilprice

By Charles Kennedy
Posted on Wed, 04 May 2016 18:26 | 0
Pakistan and Iran have signed a deal under which the former will import 75,000 tons of liquefied petroleum gas within a year, months after a similar agreement was inked with Qatar.

According to the deal, signed by the All Pakistan Liquefied Petroleum Gas Distributors Association and a national Iranian company, at least 6,000 tons of LPG will be imported from Iran every month over the course of a year.

In February, Pakistan and Qatar signed a $16-billion liquefied natural gas (LNG) deal which provides imports for 16 years, throwing the authorities in energy-crisis ridden Pakistan a life-line for supplies.

Related: A 4.5-Million-Barrel Per Day Oil Shortage Looms: Wood Mackenzie

The deal signed in Doha by Pakistani Prime Minister Nawaz Sharif and Emir of Qatar Sheikh Tamim bin Hamad bin Khalifa will see Qatar export 3.75 million tons of LNG to Pakistan. This is significant for Pakistan, which faces a 50% supply gap in relation to demand.

As concerns the deal with Iran, the price of the imported LPG will be in line with local market prices, according to All Pakistan Liquefied Petroleum Gas Distributors Association president Irfan Khokhar.
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In the meantime, Pakistan’s only LNG terminal at Port Qasim has converted 1.7 million tons of imported LNG and pumped more than 77 billion cubic feet of gas into the national gas distribution network. Over the course of last 13 months, some 29 LNG shipments from Qatar, Australia, Nigeria and Spain have docked at this port.

Related: The Last Great Frontier For Cheap Oil And Gas?

“This terminal alone will save up to $600 million for Pakistan through fuel substitution and will generate up to 2,000MW of electricity. The step to set up LNG import infrastructure is in the right direction and the country needs another three to four LNG import terminals to curtail the ongoing crisis,” Pakistani media quoted terminal manager Amir Mahmud as saying.

Riaz Haq said...

#India's #Modi visits #Iran to woo #Teheran. New era in bilateral ties - or a missed opportunity? #Chabahar #Gwadar

With the security situation in Afghanistan deteriorating, India is also looking to find various ways to maintain its foothold in the war-torn nation to counter Pakistani influence. With the land route to Afghanistan through Pakistan unavailable, it's looking at Iran to trade with Afghanistan.
India is investing more than $150m to develop Chabahar port in south-eastern Iran. It hopes the port will give a transit route to Afghanistan.
In the future, it also wants to bring gas from Central Asia and then transport it to India. The project will also give sea access to Afghanistan.

"From India's perspective, Chabahar port is a gateway to Afghanistan. From Chabahar there is a road which goes all the way to Afghanistan and it will link up with a road which India has already built inside Afghanistan. In a way, India is ensuring that there could be no exit strategy from Afghanistan," says Mr Roy-Chaudhury.
Mr Modi plans to visit Kabul in June and he is expected to sign a trilateral trade agreement with Iran and Afghanistan for Chabahar port.

During his meeting with the Iranian president Hassan Rouhani, Mr Modi would want to assure that India is keen to establish deeper and long-standing ties.
But Iranians may be a bit wary given their past experience.
India is home to the world's second highest Shia population, next only to Iran. Iran's influence over an estimated 45 million Shias in India is regarded as significant. With Iran emerging after international sanctions, it offers great investment opportunities to Indian companies.
But the bilateral ties suffered setbacks following international sanctions on Tehran over its nuclear programme. As successive Indian governments moved closer to the US, their Iran policy took a back seat, much to the displeasure of the Iranians.
Iranians were dismayed when India voted against their country at a vote in the International Atomic Energy Agency in 2009. Then India significantly reduced oil imports from Tehran following US pressure.
"That was a bitter lesson for the Iranians. They understood that India would not take Iran's side on any dispute and India would not sacrifice its relations with the US and the West for Iran," says Fatemeh Aman, an Iran-South Asia affairs analyst based in the US.
During his first two years at office, Mr Modi focused more on India's immediate neighbourhood and Indian Ocean rim countries. Relations with the United States and the west were given a priority.


When the international sanctions were in place, India could not pay for the oil it had imported from Iran. It still owes $6.5bn in unpaid dues and Delhi is still finding a way to facilitate the payment.
Western banks are still reluctant to do business with Iran when some of the US sanctions are still in place.
India is aware that China is making inroads into Iran to rebuild the economy devastated by the sanctions. The Chinese president, Xi Jinping, visited Iran in January this year to firm up business ties. Beijing is already Iran's largest trading partner.

Riaz Haq said...

China To Invest $8.5 Billion To Upgrade Pakistan's Rail Network, Build Gas Pipeline: Report

China will invest about USD 8.5 billion to upgrade Pakistan's rail network and to build a key gas pipeline with Iran to meet the country's energy needs, a media report said today.

The Central Development Working Party (CDWP), a Pakistan body to authorise major projects, yesterday approved USD 10 billion worth two projects. China will provide loans equivalent to 85 per cent (USD 8.5 billion) of the cost of each project.

The cost of upgrading of Pakistan Railways existing Mainline (ML-I) and establishment of a dry port near Havelian is USD 8.2 billion, which the Chinese government will finance with a USD 7 billion concessionary loan, The Express Tribune reported.

This project is part of USD 46 billion China-Pakistan Economic Corridor (CPEC) package and is covered under the CPEC Framework Agreement, signed during the April 2015 visit of Chinese president to Pakistan.

The estimated cost of Gwadar-Nawabshah LNG Terminal & Pipeline project, also cleared in principle, is USD 2 billion including USD 1.4 billion Chinese loan. This project is strategically important for Pakistan as it will eventually link the country's gas network with Iranian system.

"The exact costs of both the projects will be firmed up after finalising financing arrangements," CDWP Chairman and Minister for Planning, Ahsan Iqbal, said.

"After finalisation of the financing arrangements, both the projects will be taken to the Executive Committee of National Economic Council (Ecnec) with firmed up cost for final approval," he said.

At present, Pakistan Railways is picking up less than 4 per cent of the traffic volume of the country, which the government intends to increase to at least 20 per cent by 2025.

The project is planned to be completed in two phases in five years by 2021 on engineering, procurement and construction (EPC) mode. Phase-I will be completed by December 2017 and Phase-II by the year 2021.

The CDWP also cleared Gwadar-Nawabshah LNG Terminal and Pipeline Project at an estimated cost of roughly USD 2 billion or Rs. 206.6 billion.

The Chinese Exim bank will provide 85 per cent of the financing under government-to-government mode. The EPC contract will be given to a Chinese company. The pipeline project will be included in the CPEC framework.

The key objective of this project is to overcome gas shortages by importing LNG and its transportation through Gwadar-Nawabshah pipeline.

In phase-I, the pipeline will follow the coastal pipeline corridor, which was formally established for the Iran-Pakistan gas pipeline. In phase-II, a 90-kilometer patch will be constructed from Gwadar to Pakistan-Iran border to tie the national network with Iranian system.

Riaz Haq said...

#Pakistan prepares its second #LNG import terminal via @Reuters

Pakistan is taking another step towards becoming a key buyer of liquefied natural gas (LNG), signing a deal to purchase a Floating Storage and Regasification Unit (FSRU) for its second import terminal.

Singapore's BW Group said in a statement on Monday that it would deliver the FSRU to Pakistan GasPort Limited (PGPL) in the fourth quarter, as well as providing the terminal at Port Qasim, Karachi with LNG regasification services in a 15-year agreement.

The South Asian country has been earmarked as an up-and-coming demand outlet for the oversupplied LNG market. Along with Egypt and Jordan, Pakistan was a newcomer to the LNG import market in 2015, helping drive up demand and absorb growing world supplies from a wave of new projects.

The new import terminal will be able to receive 600 million cubic feet of natural gas per day and is expected to be commissioned for operations by mid-2017.

The terminal will reduce Pakistan's gas deficit by 30 percent and ensure fuel for 3,600 megawatts of new power generation plants being constructed in the country, said PGPL chairman Iqbal Ahmed.

Pakistan started up the 3.5 million tonnes per year Engro Elengy LNG terminal, the country's first LNG import facility, in Port Qasim last March. Pakistan shipped in a total of 1.02 million tonnes of LNG in 2015, and has imported 1.78 millions tonnes in the first seven months of this year.

"We are seeing weaknesses more in the North Asian market, and (South) Korea ... and a lot of the strong (demand) growth in where you might expect," said Neil Beveridge, a Hong Kong-based analyst at AB Bernstein, referring to emerging economies such as Pakistan.

Qatar, which signed two term supply contracts with Pakistan this year, is the country's largest LNG supplier.

Riaz Haq said...

Floating liquefied natural gas terminals are key to #Pakistan’s #energy plan. #LNG 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

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.

Riaz Haq said...

#India should revive #Iran-#Pakistan-India gas pipeline: #Indian Parliamentary Panel … via @FinancialXpress

India should consider reviving the long-delayed Iran-Pakistan-India (IPI) gas pipeline following easing of sanctions on Tehran, a Parliamentary panel has said. India had almost abandoned the IPI pipeline in 2008 following the US sanctions against Iran over its suspected nuclear programme and has instead pursued a rival line from Turkmenistan, passing through Afghanistan and Pakistan (TAPI pipeline).
“The government should examine the idea of reviving the (IPI) project as international conditions have become favourable following lifting of sanctions against Iran,” the Standing Committee on Petroleum and Natural Gas said in a report submitted to Parliament on Friday.
The Oil Ministry in its comments to the committee stated that IPI pipeline was envisaged to transport natural gas from South Pars gas field of Iran to Pakistan and India with a carrying capacity of 60 million standard cubic meters per day, to be equally split between India and Pakistan. “The total length of the pipeline up to Indian border (near Barmer) was about 2,135 km (1,100 kms within Iran and the rest within the territory of Pakistan),” the ministry said. “As per past estimates, investments required for this pipeline were in excess of $7 billion.”
There has been “little or no progress” in the IPI project since 2008 for a number of reasons, the Committee said in its report without elaborating.

India is pursuing transnational pipelines to meet rising energy needs. The country is reliant on imports to meet about half of its natural gas needs. The panel said a consortium for Turkmenistan-Afghanistan -Pakistan-India (TAPI) pipeline — TAPI Pipeline Company Ltd (TPCL) — was incorporated in Isle of Man, and shareholders’ agreement signed in December 2015.
Turkmenistan will own 85 per cent of TPCL while India, Pakistan and Afghanistan will each have 5 per cent stake. “The construction of pipeline has commenced in December 2015 and is likely to be completed in about 7 years,” it said.
It recommended that TAPI project be monitored closely in collaboration with other participating countries in order to ensure that the project is completed in time.
“The Committee feels that trans-national pipelines are important elements of national energy security and they need to be pursued vigorously,” the report added.
On April 7 last year the Investment Agreement (IA) of TPCL was signed in Ashgabat. “It relates to initial equity infusion by the shareholders. TPCL subsequently opened its office in Dubai, UAE and has been holding its board meetings,” the ministry said in its submission to the panel.