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:

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

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


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...


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...


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 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 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.

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.

Riaz Haq said...

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

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 … 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 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 …

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 …

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 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 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 …

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 …

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...

#Pakistan Energy Crisis Prompts #Engro to Boost #Energy Business With 2nd #LNG-fueled #Power Plant 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.


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...

#Pakistan Sees Bigger #LNG Profile; Imports to Surge From 4.5 Million Tons in 2016 to 30 Million Tons by 2022

Pakistan says it could become one of the world's top-five buyers of liquefied natural gas (LNG), with Petroleum Minister Shahid Abbasi predicting imports could jump more than fivefold as private companies build new LNG terminals.

Outlining Pakistan's ambitious plans - which, if fully implemented, could shake up the global LNG market - Abbasi told Reuters that imports could top 30 million tonnes by 2022, up from just 4.5 million tonnes currently.

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

(For a graphic on LNG market share by region click

"Within five years, I don't see any reason why we should not be beyond 30 million tonnes (in annual LNG imports). We will be one of the top five markets in the world," Abbasi said.

That kind of jump would represent one of the fastest growth stories in the energy industry, comparable to what China has done in many commodities - but there are doubts whether Pakistan can achieve its ambitions, given the complexity and cost of expansion projects.

"It's always possible, but seems very difficult as they will need much more (regasification) capacity and downstream pipeline capacity," said Trevor Sikorski at Energy Aspects, a London-based industry market researcher. "There are infrastructural issues and financial issues."

"Still, it is one of the key LNG growth markets, and its demand will help tighten up the market that has threatened to lurch into over supply."

Abbasi said no one took Pakistan seriously after a decade of botched attempts to bring LNG to the country, but this has changed with the construction of new LNG terminals and gas plants. He said foreign suppliers are now arriving in Pakistan - where energy shortages have prompted Prime Minister Nawaz Sharif to promise he'll end the country's frequent blackouts.

"Before, we used to go out to talk to LNG suppliers. Now they're coming to us," Abbasi said.

"(LNG) is really what has saved the whole energy system. It has been a huge success in Pakistan and it will continue," he said after Sharif on Friday inaugurated a new Chinese-built LNG power plant that uses General Electric turbines.


Pakistan built its first LNG terminal in 2015 and, after some delays, a second terminal is due to come online in October, doubling annual import capacity to about 9 million tonnes.

A consortium of Exxon Mobil, Total, Mitsubishi, Qatar Petroleum and Norway's Hoegh is expected to decide by September whether to build a third LNG terminal for about $700 million, Abbasi said.

Pakistan has dropped plans to finance up to two more terminals, as private companies have said they would finance these themselves and use Pakistan's existing gas network to sell directly to consumers.

"That's been the real success and that's where the growth will come from," Abbasi said, adding that about 10 million homes are linked to gas connections in Pakistan - a nation of around 200 million.

"In the last four years, we would have added two million additional connections. We are really ramping that up."

If Pakistan achieves its ambitious development goals, it could significantly erode market oversupply, which has helped pull down Asian LNG spot prices by more than 70 percent since 2014 to around $5 per million British thermal units (mmBtu).

Riaz Haq said...

Woodside sees Qatar LNG expansion hurting U.S. LNG growth

MELBOURNE (Reuters) - A plan by top global liquefied natural gas (LNG) exporter Qatar to ramp up output will stall the expected growth of U.S. LNG exports, the head of Australia's Woodside Petroleum, operator of the country's biggest LNG plant, said.

Qatar surprised rivals this month when it lifted a self-imposed ban on development of the North Field, the world's biggest natural gas field, saying it would boost LNG output by 30 percent to 100 million tonnes a year in five to seven years.

That put it on course to it wrest back the title of the world's top LNG exporter from Australia, which is set to overtake Qatar in the next two years.

Woodside, operator of the North West Shelf project, said Qatar's plan showed the emirate shares its outlook for solid demand growth for LNG and gives importers like China, India, Pakistan and Bangladesh the supply certainty they need to lock in gas expansion plans.

"The Qataris will not take up all of the available market," Woodside Chief Executive Peter Coleman told Reuters in an interview on Thursday.

Qatar's expansion plan will compete directly with Woodside, which is looking to develop the Browse and Scarborough fields off Western Australia within the next decade - its so-called Horizon 2 projects - by processing gas through the North West Shelf plant or other existing facilities.

"On the challenge side, low cost will get into market, and that's what we're doing with our Horizon 2 projects. We're trying to make sure they're low cost, and they're well positioned, because we're targeting the Asian market," Coleman said.

Projects that will find it harder to compete will be those that need billions of dollars in new infrastructure and coal seam gas-to-LNG projects that need continuous capital spending to drill new wells, he said.

The International Energy Agency last week forecast the United States would become the world's second largest LNG exporter by the end of 2022, but Coleman said the Qatari expansion would stymie that growth.

"It'll keep a lid on U.S. expansions, because U.S. expansions are transportation-challenged," he said.

U.S. LNG flows largely into the Atlantic market, where it competes against pipeline gas from Russia and Norway.

Riaz Haq said...

GE sets gas turbine record in #Balloki #Punjab #Pakistan. #LNG - #Power Engineering International

GE sets gas turbine record in Pakistan

By Tildy Bayar
Features Editor

GE has beat its global record for first fire of an H-class gas turbine in Pakistan.

Along with Chinese EPC partner Harbin Electric International Company, GE said it completed the first test in 66 days from delivery on-site.
It added that grid synchronization of the gas turbine was achieved in 74 days, another record.
Two 9HA.01 gas turbines and one steam turbine were supplied to the 1.2 GW LNG-fuelled combined-cycle Balloki power plant in Punjab, currently under development by Pakistan’s government through the National Power Parks Management Company Limited (NPPMCL).
The plant is scheduled for commissioning later this year. It will feature a primary re-gasified LNG fuel system, a secondary diesel fuel system, water cooled condensers and a cooling tower.
The first turbine is now producing up to 380 MW, GE said.
In a statement, the firm emphasized the “strong collaboration” with NPPMCL and Harbin Electric in driving the project.
The previous record was set at Pakistan’s 1230 MW Haveli Bahadur Shah plant, where the duration from gas turbine delivery to first fire test was 74 days according to GE.
Pakistan is the first country in the MENA-Turkey-South Asia region to install 9HA turbines.
Rashid Mahmood Langrial, CEO of NPPMCL, said, “We are committed to delivering on the government’s vision to strengthen power generation in Pakistan and to meet the growing needs for power for residential and commercial use.
“With the first fire and synchronization of the first gas turbine, Balloki is on schedule to enter operation and will support the people and national economic growth of Pakistan.
“The record completion of first fire is a strong demonstration of the extraordinary teamwork that is going into the project to ensure its timely commissioning.”
Pakistan is actively working on boosting its energy security. Earlier this month, the nation signed an agreement with France’s Agency for Development (AFD) for $192m in loans to bolster its energy sector against growing demand.
Planned work includes modernizing the 1 GW Mangla hydropower plant and improving transmission efficiency.

Riaz Haq said...

Pakistan, India imported 25m tons of LNG last year

South Asia, long a backwater for energy markets, is emerging as a hotspot for liquefied natural gas (LNG) with Pakistan and Bangladesh set to join India as major consumers, helping to ease global oversupply that has dogged the market for years.

Pakistan started importing LNG in 2015 after developing its first terminal within schedule and budget. A second is about to become operational and a third is expected to be completed next year.
With Bangladesh set to join the club of importers next year, the region could import 80-100 million tonnes a year by mid-2020s, analysts said, making it the world’s second biggest import region, ahead of Europe.

“By 2025, depending on our national demand, we will import anywhere from 2,000 to 2,500 mmcfd of gas,” Hamid said. Those imports would add to plans from India and Pakistan to buy 50 million and 30 million tonnes of LNG per year, respectively, by mid-2020s.
“LNG imports in South Asia are expected to rise four-fold from 22 million tonnes per year in 2016 to over 80 million tonnes per year by 2030,” said Mangesh Patankar, head of Asia-Pacific business development at energy consultancy Galway Group.
Should all plans in the region go ahead and Sri Lanka also starts imports, this figure could rise to 100 million tonnes, industry project data shows. That would push South Asia’s demand ahead of Europe as the world’s second biggest LNG import region by 2020, though it would still lag North Asia’s 150 million tonnes of annual imports.
The boom in demand will help ease oversupply in LNG markets, which have resulted in a more than 70% price fall from their 2014 peaks to $5.75 per million British thermal units.
Source: Reuters

Riaz Haq said...

LNG keeps Pakistan’s economy moving, price lower than other fuels

Around eight months back, Pakistan signed a 15-year agreement with Qatar for import of 3.75 MTPA (millions ton per annum) to meet its growing energy needs as all the existing natural gas reserves appeared insufficient to bridge the ever-increasing gap between demand and supply of the commodity.

The deal started doing wonders when the imported gas fed industries, CNG stations, gas-fired power generation plants and fertilizer sector, giving an impetus to economic activities in the country.

"The country had no option other than to import gas whether it is the LNG or through Iran-Pakistan and Turkmenistan-Afghanistan-India gas pipeline projects as the country's existing reserves are depleting and there is no major find since long," officials of Ministry of Energy's Petroleum Division told APP.

They expressed confidence that the LNG import would prove to be a game-changer for Pakistan because it was considered an essential part of the energy mix needs of emerging economies.

The world is turning towards the LNG and emerging economies such as China, Korea, Japan, India, Thailand, Indonesia, European Union, and Brazil ensure that teh LNG remains part of their energy mix requirements.

The Japan is importing 80 million ton of LNG every year (MTPA) and India 15 MTPA due to the commodity's low price and efficiency as compared to other fuels.

The Pakistan's gas supply-demand gap has reached four billion cubic feet per day (BCFD) as total unconstrained gas demand of the country is eight BCFD against total supply of four BCFD. Needless to say in winter the demand rapidly increases.

They said the LNG was the cheapest alternative fuel and the only instant available remedy to meet the country's energy needs when the existing natural gas reserves were diminishing.

"The LNG is available to consumers at cheaper rate than the LPG. The RLNG price for consumers will be lower than the prices of other alternate fuels. The price of the LNG for consumers is Rs850 per MMBTU as compared to home delivered price of the LPG at Rs2,000 per MMBTU and domestically produced natural gas is priced up to Rs700 per MMBTU," the official disclosed.


In 2015, the country got its first LNG terminal, which was built in the record period of 11 months and is injecting 600 MMCFD of RLNG in the national system to meet the existing energy shortfall.

Normally, a terminal takes around three to four years to complete and become operational, but it is the hallmark of the present government to set up the country's first LNG terminal in just 11 months.

The second terminal is scheduled to start functioning shortly at the Port Qasim.

Now, the world's major players are showing interest to invest in the LNG sector of Pakistan by setting up their own terminals and developing supply networks to supply gas to consumers through third party access.

Pakistan is building deeper relations with many countries through oil and gas deals on a government-to-government basis after the successful model of oil imports from Kuwait, and in this context, the LNG import deals with various countries, including China, Turkey, Russia, Malaysia, Indonesia and Oman are being negotiated.

Riaz Haq said...

Pakistan to lock another 3 mil mt of LNG in term contracts by year-end

Singapore (Platts)--28 Sep 2017 232 am EDT/632 GMT

Pakistan is currently in negotiations to secure an additional three million mt of LNG in long-term contracts by the end of the year to supply its new LNG floating terminal due to arrive by December, according to M. Adnan Gilani, chief operating officer with Pakistan LNG Ltd.

The negotiations are taking place with over half a dozen potential suppliers on a bilateral government-to-government basis, Gilani said at an interview with S&P Global Platts Thursday on the sidelines of the 9th CWC LNG Asia Pacific Summit, held in Singapore September 19-22.

"We hope to have two to three government-to-government agreements signed by the end of this year," Gilani said. "In the interim, we will secure around four spot cargoes a month [the equivalent of 3 million mt/year] until our contracts start."

The new supply agreements will increase Pakistan's total LNG contractual commitment to more than 11 million mt/year, as the country aims to resolve a decade-long energy crisis, driven by mounting gas consumption and faltering domestic production.

The new contractual volumes will be delivered to Pakistan's second floating, storage and regasification unit -- with a capacity of 4.5 million mt/year -- due to arrive at Port Qasim by the end of the year.

Currently, imports are being delivered to the Exquisite, an FSRU with a similar capacity, with another two due start up in the second half of 2018, all in Port Qasim.

Pakistan term LNG contracts fromo 2018


As with PLL's previous supply agreements, the new deals will also be priced against international crude oil benchmarks, Gilani said.

PLL aims to change the electricity feedstock landscape by replacing fuel oil with regasified LNG, so LNG priced at a low slope to crude would guarantee the competitiveness of LNG over crude.

"Because of the fuel-oil substitution effect, the risk of oil prices moving in one direction or another is less of a concern; as long as it is oil linked, it is always better for us compared to fuel oil," Gilani said.

The excess use of fuel oil in power generation as a result of Pakistan's decade-long gas shortage has cost the government an extra $1 billion-$2 billion/year.

The country's consumption of diesel and fuel oil, a more expensive alternative to gas in power generation, peaked at 387,140 b/d in fiscal year 2014-15 (July-June), according to data from Pakistan's Oil Companies Advisory Council, before falling 1% in fiscal 2015-20, following the startup of the country's first LNG import terminal in March 2015.


In the longer term, Pakistan aims to allocate a quarter of its LNG purchases to the spot and short-term markets, Gilani said.

"Initially, our goal is to solve our energy crisis. We have long-term downstream commitments, so we do not mind going to mid-to-long term initially," he said.

"Over the course of time, we will be able to cater to our variable non-cyclical demand... and allocate about a quarter of our portfolio to spot and short term.

PLL is currently purchasing four cargoes per month on a short-term basis as it awaits the start of new term volumes.

In the company's most recent tender, issued Tuesday, PLL sought four cargoes for delivery in January, with an award due to be announced November 3. PLL's previous tender, for four December cargoes, received 15 bids from a total of six sellers: Vitol, Engie, Gas Natural Fenosa, Gunvor, Trafigura and BB Energy. The lowest offer, at 13.98% of ICE Brent, was submitted by BB Energy. An award is yet to be announced.

Riaz Haq said...

Exclusive-Exxon Exit Deals Blow to Pakistan Plans for LNG Imports

Exxon Mobil has pulled out of a major project in Pakistan, in a potential blow to plans to boost imports of liquefied natural gas (LNG) after years of winter shortages.

Differences among the six-member group behind the project in Port Qasim in Karachi mean French oil major Total and Japan's Mitsubishi may also quit and join a rival scheme, government officials and industry sources told Reuters.

A senior Pakistani government official put the chances of success for the project, set to be Pakistan's third and biggest by import capacity, at 10-20 percent due to the disagreements.

A highly-developed pipeline grid, extensive industrial demand and the biggest natural gas-powered vehicle fleet in Asia after China and Iran make Pakistan an easy fit for LNG and official estimates show imports could jump fivefold to 30 million tonnes per annum (mtpa) by 2022.

The new project would include a floating storage and regasification unit (FSRU), where LNG will be converted back into gas for feeding into the country's grid.

Qatar Petroleum [QATPE.UL], the world's biggest LNG producer, Turkish developer Global Energy Infrastructure Limited (GEIL) and Norway's Hoegh LNG, which will provide the FSRU, are the other partners.

While Exxon has pulled out, the U.S. company was now negotiating to join a separate project, Hasil Bizenjo, Pakistan's Maritime Affairs minister in charge of ports, said.

"They are thinking to build a new terminal in Port Qasim," Bizenjo told Reuters in the Pakistan capital Islamabad, adding that Mitsubishi and Total were also in talks about taking stakes in another consortium.

Exxon was pulling out because it had "issues with partners", particularly the developer, GEIL, one energy official said. Exxon's move leaves in doubt a multi-billion dollar deal Qatar has already struck with GEIL for the sale of up to 2.3 million tonnes of LNG annually over 20-years.

Exxon Mobil, Total and GEIL declined to comment, while a Mitsubishi spokesman said that the Japanese company has been continuing its talks with partners over the project.

Qatar Petroleum did not respond to requests for comment.


LNG imports have transformed Pakistan's energy map since the country's first import facility was introduced in 2015.

If the second LNG terminal proceeds without glitches the South Asian nation will not suffer winter gas shortages for the first time in more than 10 years, energy officials say, in a likely boost for Prime Minister Shahid Abbasi's ruling party before the next general elections, due in mid-2018.

Government officials and industry sources said talks are underway to bring new players into the project, including Swiss trading house Vitol [VITOLV.UL], which declined to comment.

Rival traders Trafigura and Gunvor are already developing LNG projects in Pakistan, betting the country will account for a rising share of future profits and LNG trade.

Pakistan plans to add its second LNG import terminal by the end of this year, but private companies have proposed building six more largely around Port Qasim.

Riaz Haq said...

THE EXPRESS TRIBUNE > BUSINESS Higher prices force Pakistan to scrap LNG spot purchase deals
Higher prices force Pakistan to scrap LNG spot purchase deals
By Zafar Bhutta Published: January 12, 2018

ISLAMABAD: The government has decided to ink direct liquefied natural gas (LNG) supply deals with more energy-rich countries in the hope of securing cheaper contracts compared to spot purchases from energy companies.

The decision came after Pakistan received higher bids for spot purchases, which led to cancellation of a couple of contracts.

At present, Pakistan has a 15-year government-to-government LNG import agreement with Qatar, which has been shipping gas since March 2015. Now, the government has got engaged in talks with other countries as well including Russia and Malaysia to clinch state-to-state supply deals.

“State-owned Pakistan LNG Limited has been forced to scrap deals for two LNG ships due to higher quoted rates. Bids were invited for four cargoes and in response foreign companies made offers in the range of 13.2% to 16% of Brent crude oil price,” said a senior government official while talking to The Express Tribune.

Qatar is supplying LNG to Pakistan at 13.37% of Brent price and global commodity trading firm Gunvor is also bringing cargoes at the same rate. Apart from these, Pakistan LNG Limited sought bids for short- and long-term purchases and secured contracts at the best rate of 11.64% of Brent crude price. Short-term deal was signed with Gunvor whereas the long-term contract was won by Italian energy giant Eni.

The two companies will supply 200 million cubic feet of gas per day (mmcfd), meaning Pakistan LNG Limited needs to secure contracts for an additional 400 mmcfd, which will be supplied to three LNG-based power projects of 3,600-megawatt production capacity in Punjab.

Already, the second LNG terminal has started commercial operations in late November 2017 at Port Qasim in order to dedicate 600 mmcfd of LNG for the three power plants.

According to the government official, Pakistan LNG Limited planned to make spot purchases for the additional 400 mmcfd through six ships – two ships by Eni and Gunvor and the remaining four through spot purchases.

Consequently, the company invited bids, but the offers were made at higher rates compared to those for the existing deals.

Vitol submitted bids at 15.9147% of Brent price for March 8-9 delivery and 13.8301% for delivery on March 22-23. Trafigura offered its bid at 15.0591% of Brent price for March 27-28 delivery and BB Energy came up with the lowest bid at 13.2701%.

Earlier, these companies technically qualified for the supply of four cargoes in February 2018 at higher rates.

BB Energy submitted its bid for February 6-7 delivery at 15.731% of Brent price and Gunvor offered to bring cargo on February 16-17 at 16.0857%.

For February 21-22 delivery, Trafigura submitted its bid at 15.8488% whereas for February 26-27 delivery, the company quoted 14.9887% of Brent price.

Earlier, these companies technically qualified for the supply of four cargoes in February 2018 at higher rates.

BB Energy submitted its bid for February 6-7 delivery at 15.731% of Brent price and Gunvor offered to bring cargo on February 16-17 at 16.0857%.

For February 21-22 delivery, Trafigura submitted its bid at 15.8488% whereas for February 26-27 delivery, the company quoted 14.9887% of Brent price.

Riaz Haq said...

#LNG prices surge as energy transition-driven demand outstrips supply. It’s especially bad news for poorer nations like #Pakistan and #Bangladesh that reworked entire #energy policies on the premise that the fuel’s price would be lower for longer.

The era of cheap natural gas is over, giving way to an age of far more costly energy that will create ripple effects across the global economy.

Natural gas, used to generate electricity and heat homes, was abundant and cheap during much of the last decade amid a boom in supply from the U.S. to Australia. That came crashing to a halt this year as demand drastically outpaced new supply. European gas rates reached a record this week, while deliveries of the liquefied fuel to Asia are near an all-time high for this time of year.

With few other options, the world is expected to depend more on cleaner-burning gas as a replacement to coal to help achieve near-term green goals. But as producers curb investments into new supply amid calls from climate-conscious investors and governments, it is becoming apparent that expensive energy is here to stay.

Already, there are signs around the world that supplies will fall short:

Beyond a massive expansion in Qatar, few new LNG export projects have been cleared since the start of 2020.
End-users have been less willing to take equity stakes in upstream projects or sign long-term supply deals due to uncertainty surrounding government-led efforts to reduce emissions.
U.S. shale drillers aren’t immediately responding with additional production, as they’re under pressure from investors to curb spending and avoid creating another glut, while key pipeline projects struggle to move forward.
“No matter how you look at it, gas will be the transition fuel for decades to come as major economies are committed to reach carbon emission targets,” said Chris Weafer, chief executive officer of Moscow-based Macro-Advisory Ltd. “The price of gas is more likely to stay elevated over the medium-term and to rise over the longer-term.”

Strong Consumption

By 2024, demand is forecast to jump 7% from pre-Covid-19 levels, according to the International Energy Agency. Looking further out, the appetite for liquefied natural gas is expected to grow by 3.4% a year through 2035, outpacing other fossil fuels, according to an analysis by McKinsey & Co.

Surging natural gas prices means it will be costlier to power factories or produce petrochemicals, rattling every corner of the global economy and fueling inflation fears. For consumers, it will bring higher monthly energy and gas utility bills. It will cost more to power a washing machine, take a hot shower and cook dinner.

It’s especially bad news for poorer nations like Pakistan and Bangladesh that reworked entire energy policies on the premise that the fuel’s price would be lower for longer.

European natural gas rates have surged more than 1,000% from a record low in May 2020 due to the pandemic, while Asian LNG rates have jumped about six-fold in the last year. Even prices in the U.S., where the shale revolution has significantly boosted production of the fuel, have rallied to the highest level for this time of year in a decade.

While there are several one-off factors that have pushed gas prices higher, such as supply disruptions, the global economic rebound and a lull in new LNG export plants, there is a growing consensus that the world is facing a structural shift, driven by the energy transition.

A decade ago, the IEA declared that the world may be entering a “golden age” of natural gas demand growth due to historic expansion of low-cost supply. Indeed, between 2009 and 2020, global gas consumption surged by 30% as utilities and industries took advantage of booming output.

Riaz Haq said...

#Pakistan #LNG gets single bid from #Qatar #Energy at $39.80/mmbtu for July cargo, highest ever. Pakistan has increased reliance on LNG for #electricity generation, but is facing widespread power outages as sup-ply of LNG remains unreliable & #expensive.

ISLAMABAD, June 23 (Reuters) - Pakistan LNG Ltd (PLL) received a single bid from Qatar Energy at $39.80/mmbtu for an LNG import tender seeking a cargo in the July 30-31 window, an industry source said on Thursday.

The source said no bids were received for three other deliveries sought in July, which was later confirmed by documents uploaded on PLL's website.

The source added that PLL had decided not to pick up the costly bid.

A spokesman for Pakistan's power ministry, under which PLL operates, did not immediately respond to a Reuters request for comment.

Pakistan had sought four cargoes from international suppliers during the windows of July 3-4, 8-9, 25-26 and 30-31.

Pakistan unsuccessfully tapped the spot market earlier this month for an extra July cargo, with two tenders not returning valid bids.

In recent years Pakistan has increased reliance on LNG for electricity generation, but is facing widespread power outages as procurement of the chilled fuel remains unreliable and expensive.

Riaz Haq said...

10,707 km pipelines being laid to reinforce gas transmission network in Pakistan

The two state-owned companies, SNGPL and SSGC, are in process of laying almost 10,707-kilometer pipelines to reinforce gas transmission networks in their operational areas across the country during the current fiscal year.

The Sui Northern Gas Pipelines Limited (SNGPL) would place 9,605 kilometers and Sui Southern Gas Company (SSGC) 1,102 transmission and distribution pipelines in their respective areas during 2022-23 aimed at improving the efficiency of the commodity supply to domestic, industrial, and commercial consumers.

The companies would collectively spend funds amounting to Rs 113.899 billion on the upgradation of the gas transmission and distribution system. “The SNGP and SSGC have planned to invest Rs 27,669 million on transmission projects, Rs 77,484 million on distribution projects, and Rs 8,746 million on other projects bringing the total investment of Rs 113,899 million during the fiscal year 2022-23,” according to an official document available with APP.

The available statistics indicated that Pakistan has an extensive gas network with more than 13,513 KM transmission, 155,679 KM distribution, and 41,231 KM service gas pipelines for cater to the requirement of millions of consumers.

The companies are also executing at least three strategic projects to supply gas to two Special Economic Zones (SEZs) and an industrial park in their respective areas to boost industrial production.—APP

Riaz Haq said...

State-owned Pakistan LNG (PLL) has announced its intention to secure nine LNG cargoes during the months of October, December, January 2024, and February 2024.


The federal government issued two tenders seeking spot liquefied natural gas (LNG) cargoes for the first time in nearly a year on Tuesday, while also announcing a deal that will see Azerbaijan provide the country with one LNG cargo per month.

Dependent on gas for power generation and running short of foreign exchange to pay for imports, the country has struggled to procure spot cargoes of LNG after global prices spiked last year following Russia’s invasion of Ukraine, leaving it to face widespread power outages.

But Asian spot LNG prices this year have eased from record highs of $70 per million British thermal units (mmBtu) hit in August, and are now trading below $10.

Pakistan LNG, a government subsidiary that procures LNG from the international market, has one tender seeking six cargoes on a delivered-ex-ship (DES) basis to Port Qasim in Karachi in October and December, according to the tenders posted online.

The delivery windows are October 5-6, 20-21 and 31, and December 7-8, 13-14 and 24-25. The tender will close on June 20.

Pakistan LNG’s second tender seeks three cargoes, also on DES basis to Port Qasim, for delivery windows of January 3-4, 28-29 and February 23-24. The second tender closes on July 14.

Pakistan LNG last issued a tender seeking 10 spot cargoes in July 2022, but received no offers.

Separately on Tuesday, Minister of State for Petroleum Musadik Malik told a news conference that Azerbaijan will supply an LNG cargo every month to Pakistan at a “cheaper price”.

He did not share details on the supply deal, but said that a contract had already been signed with Azerbaijan and that it will “start soon”.

Pakistan has two long-term supply deals with Qatar, one signed in 2016 for 3.75 million metric tons of LNG a year, and another signed in 2021 for 3m metric tons a year.

It also has an annual portfolio contract with ENI for 0.75m metric tons a year.

In 2022, Pakistan’s imports of LNG slowed to 6.93m metric tons for the year, down from 8.23m metric tons in 2021, according to data from data analytics group Kpler.