Oil, Gas and Refinery Projects update

[farok84]

Brother, I have been hearing about this of the last 15+ yrs. Is the current GoP serious about it?

i heard pakistani government is not releasing the land
and is actually not interested in the project
whts ur take @farok84

Hi,

I am not too sure. I think the lack of seriousness was from both sides. First Zardari happened, then blockade of funds from UAE, but we can thank Mr. 10% upgrading to Mr. 100% for that too.

I believe they have completed civil construction and are in process of mechanical construction now. Let's hope they are able to complete it.

Parco is 60-40% split between Pakistan and UAE, so Pakistan also has to arrange finances for it. I think they offered China some stakes in it too around Feb-March 2021, in hopes of raising some capital, but China might have other plans.

Unfortunately I don't have credible information on it's progress. Maybe @niaz sb can help us out and offer his insight on the subject.

 

[Blacklight]

Hi,

I am not too sure. I think the lack of seriousness was from both sides. First Zardari happened, then blockade of funds from UAE, but we can thank Mr. 10% upgrading to Mr. 100% for that too.

I believe they have completed civil construction and are in process of mechanical construction now. Let's hope they are able to complete it.

Parco is 60-40% split between Pakistan and UAE, so Pakistan also has to arrange finances for it. I think they offered China some stakes in it too around Feb-March 2021, in hopes of raising some capital, but China might have other plans.

Unfortunately I don't have credible information on it's progress. Maybe @niaz sb can help us out and offer his insight on the subject.

Projects like these are gold mines, so I fail to understand why GoP is facing fund raising issues.

Ideally given our relationship with KSA & UAE, we should have set up huge Refineries and PetroChem complexes, which would have not only met our domestic demand, but would have been export earners for us as well.

Now if GHQ would take over stagnated critical projects, of national security and interest, liberals and illiterates would be go apeshit.

 

[Patriot forever]

Projects like these are gold mines, so I fail to understand why GoP is facing fund raising issues.

Ideally given our relationship with KSA & UAE, we should have set up huge Refineries and PetroChem complexes, which would have not only met our domestic demand, but would have been export earners for us as well.

Now if GHQ would take over stagnated critical projects, of national security and interest, liberals and illiterates would be go apeshit.

Regarding Parco oil refinery I think government finalised the land problems a few months ago. Government of Balochistan granted lease to Parco. Correct me if I am wrong but it is a project worth roughly around $9b, it is beyond the scope of any institution on its own. With the new policy and the incentives offered there is a high probability that we might get access to funding/investment.

Apart from the new refineries, even existing refineries are operating at around half their capacity to refine crude into high value products like petrol and diesel and end up with FO. This segment has been neglected for a long time. We import high value products directly roughly around 50% of petrol and 60% of diesel to meet out requirements.

With the recent developments and policy announcement, Byco ( corrected not Parco but Byco) is the first I think which is investing around $800m in upgrading its facilities to increase value addition instead of FO into petrol and diesel that too of higher standard. This alone will result in saving of 5-6% value of crude import.

@farok84 your comments brother?

 

[farok84]

Ideally given our relationship with KSA & UAE, we should have set up huge Refineries and PetroChem complexes, which would have not only met our domestic demand, but would have been export earners for us as well.

Hi,

I actually argued about this in 2018, when KSA proposed it's refinery in Gwader.

Question: Why are we planning so many refineries? KPK government is planning to install two refineries (Falcon Oil, 100k bpd and recently licensed Khyber Refinery, 20k bpd) and are planning to increase provincial refining capacity to 200k bpd eventually (they have another refinery planned with Russians & KPOGCL ~20k bpd, but was not issued a construction license yet).

So, now we have;
1. KSA (Gwader Refinery) ~ 500k bpd (Planned) - Balochistan
2. UAE (Cosatal Refinery) ~ 250k bpd (Planned) - Balochistan
3. Khybery Refinery (Pakistan's private investor & UAE based US consortium, construction license awarded 2018) - KPK
4. Falcon Oil ~100k bpd (Pakistan's private investor and Chinese group, construction license awarded 2017) - KPK
5. KPOGCL & Russian consortium (Kohat Refinery) ~20k bpd (Planned, conducting feasibility) - KPK

Are these not too many for our requirements? For these to work, IK hopefully can convince China to import from these refineries and invest actively in Gwader - Kashgar rail and pipeline links, in his upcoming visit.

We have ~400 kbpd refining capacity which results in an imbalance of ~200 kbpd equivalent imports. Now, KPK is planning to increase its capacity by ~200 kbpd [divided among its 3 new refineries, Falcon ~100 kbpd, Khyber ~20 kbpd (eventually planned to be increased to ~40k), Karak (KPOGDCL refinery) ~20 kbpd (eventually to be increased to 60k)]. With KSA & UAE, GOP is planning a combined increase of ~950k bpd, and a total of ~1.350 mmbpd refining capacity, say in next 10 years. Regardless of whether we can achieve it or not, we have an intent, this intent should have some basis. This particular refinery (Coastal) when was planned in 2007, was intended to cater our needs 5-10 years down the line, that is today and would have catered to our refining woes and that ~200k bpd equivalents effectively.

Our, oil demand should be going down, we are actively converting our power generation to gas fired plants, this is one of the largest areas for our consumption. So, where are we expecting increase in our demand over next 10 years, and that too from ~600k to 1.35 mmbpd, and how are we planning to support it? Our oil production is at around ~84k bpd and is expected to decline.

So, we will be relying on foreign crude imports of about ~1.25 mmbpd or 456.25 mmbbl/year. Having current prices of $76.47 for Arab Light locked, we are looking at a price tag of ~$34.8 Billion/year. This doesn't look like a very well thought out plan, or we are missing a very important variable in the equation. Maybe we are not the only intended target for the products, and the GOP has envisaged another player to pick some of that ~34.8B cheque. They did offer an ROI of 16% to KSA, that is atleast 6% more of the going rate, some may even say twice - our economy alone will not be able to support this. That's why I said IK needs to convince China in investing on rail and pipeline links between Gwader and Kashgar in his upcoming visit, and focus on China's energy security paradigm with Pakistan being in central and pivotal role.
"

I am still of the opinion that we actually don't need all these refineries (KSA, UAE and bunch of smaller ones, planned in KPK) for our own consumption and if and when, all these are actually constructed, the products will flow to China, maybe that was the reason for GOP's invitation to China in Parco project. For our own consumption, a 250,000 bpd KSA or Parco refinery would have suffices, specially with our heavy investment in Lng ecosystem.

I also believe if China is ever going to import refined products through any refinery in Pakistan, it would be from it's own investments, with Chinese control on operations and crude oil procurements (maybe Iran/ Iraq Crude Blends), as evident from it's own proposed alternative to KSA and UAE refineries.

China to set up $15b oil complex | The Express Tribune

A consortium of Chinese state-owned companies offered to set up a $15b oil refinery complex that may provide some relief to Pakistan.

tribune.com.pk

CPEC Phase 3 has a planned tunnel through Karakorums for railway links, let's hope they also lay a bunch of pipelines through it too, for crude oil, products and gas.

FWO has a contract (likely for feasibility study) with Petroleum Division for Gwader to Kashgar crude oil pipeline.

29 May 2018: Signing of Agreement for Gwadar – Kashgar Cross Country Crude Oil Pipeline Project

www.fwo.com.pk

With the recent developments and policy announcement, Parco is the first I think which is investing around $800m in upgrading its facilities to increase value addition instead of FO into petrol and diesel that too of higher standard. This alone will result in saving of 5-6% value of crude import.

I don't have knowledge regarding Parco Mid Country Refinery upgrade plans, but Byco will certainly take the lead. They have the largest refining capacity (over 150,000 bpd) in Pakistan and are not afraid to take risks. With Parco joining them that's a combined capacity of ~270,000 bpd. These upgrades will help us in reducing our product imports, and import bills.

Byco Refinery to convert FO into petrol, diesel by 2024

HUB, Balochistan: In a welcoming development, the Byco Refinery has taken the lead in initiating the process to install an upgraded plant in its vicinity aiming to convert furnace oil by 2024 into...

www.thenews.com.pk

With incentives in new refinery policy, others (NRL, PRL, ARL) will follow too. I wish they had also provided similar tax holiday to Lng terminals (new/ old) for establishing onshore terminals instead of FSRU ones.


Pakistan needs to look beyond oil/ gas imports. Our economy can't sustain it, even with generous subsidies from our Gulf brothers (KSA, UAE, Qatar). Our future prosperity is in becoming transit hub not only for China's energy needs, but also by providing access to unexplored markets for Central Asian Oil/ Gas, by becoming the center for Turkmenistan, Uzbekistan and Kazakhstan's Oil/ Gas (Lng) exports to markets in South Asia (Bangladesh), Southeast Asia (Thailand, Philippines, Vietnam, Singapore), North Asia (Japan, South Korea) and Europe. I hope Planning and Petroleum Divisions have started working on these lines and have drawn up some solid proposals.

 

[niaz]

Hi,

I am not too sure. I think the lack of seriousness was from both sides. First Zardari happened, then blockade of funds from UAE, but we can thank Mr. 10% upgrading to Mr. 100% for that too.

I believe they have completed civil construction and are in process of mechanical construction now. Let's hope they are able to complete it.

Parco is 60-40% split between Pakistan and UAE, so Pakistan also has to arrange finances for it. I think they offered China some stakes in it too around Feb-March 2021, in hopes of raising some capital, but China might have other plans.

Unfortunately I don't have credible information on it's progress. Maybe @niaz sb can help us out and offer his insight on the subject.

The planned expansion has taken far too long and as you correctly pointed out because it is a joint venture; decision making about a large investment is not easy. Sadly I don't have any additional info in this regard.

 

[niaz]

@farok84 @niaz Brothers, what are your real life expectations, from this win? Keeping ground realities in mind.

Nearly all of the potential oil/gas deposit areas of the Persian /Arabian Gulf region have already been extensively mapped. Even though this does not preclude the existence of hydrocarbon baring structures in the new block, this does mean that finding new reserves in this block is a 'Possibility' and not a 'Probability'. Besides, oil exploration has always been a calculated risk; let us keep our fingers crossed.

 

[ali_raza]

Nearly all of the potential oil/gas deposit areas of the Persian /Arabian Gulf region have already been extensively mapped. Even though this does not preclude the existence of hydrocarbon baring structures in the new block, this does mean that finding new reserves in this block is a 'Possibility' and not a 'Probability'. Besides, oil exploration has always been a calculated risk; let us keep our fingers crossed.

pakistani government wouldn’t spend 400 million if it wasn’t a probablity
we aren’t that rich

 

[ghazi52]

Pakistan’s total refining capacity is 19.37 million tonnes per year, according to the Economic Survey, while the country consumes 19.68 million tonnes of petroleum products annually.

The government says refinery capacity is not being fully utilised on account of financial as well as technical problems, and is supplying only 11.59 million tonnes per year, with the rest of the country’s needs imported.

 

[niaz]

pakistani government wouldn’t spend 400 million if it wasn’t a probablity
we aren’t that rich

Regardless of it being a probability or a possibility, we have to remember that success rate in oil exploration is seldom more than 1 in 5. Have we already forgotten Kekra-1 where an investment of close to $100-million went to waste? (Actually Rs 14- billion per (https://archive.pakistantoday.com.p...ling-at-kekra-1-near-karachi-coast-completed/).

We need to keep our fingers crossed and not jump the gun.

 

[ali_raza]

Regardless of it being a probability or a possibility, we have to remember that success rate in oil exploration is seldom more than 1 in 5. Have we already forgotten Kekra-1 where an investment of close to $100-million went to waste? (Actually Rs 14- billion per (https://archive.pakistantoday.com.p...ling-at-kekra-1-near-karachi-coast-completed/).

We need to keep our fingers crossed and not jump the gun.

i can’t match ur experience or intelligence
but kekra affair is much more dubious
its wasn’t just a waste as per some people

 

[ghazi52]

CCoE approves Pakistan Oil Refinery Policy 2021

Mon, 13 Sep 2021, 7:07 PM

ISLAMABAD, Sep 13 (APP):..... The Cabinet Committee on Energy (CCOE) approved on Monday the Pakistan Oil Refinery Policy 2021and directed the Petroleum Division to revisit the upfront incentive package offered to the existing refineries in the country.

The meeting of the Committee was held here under the chairmanship of Minister for Planning, Development and Special Initiatives Asad Umar.

The committee discussed in detail the proposed policy presented by the Power Division.

The Chairman of the Committee appreciated the work and efforts of the Petroleum Division and highly knowledgeable and experience professional involved in the formation of this policy.

The Power Division submitted a report of the implementation committee on the ratification of the IPPs Agreement, under the 2002 Power Policy.

After a detailed discussion, the Committee approved the final report of the Implementation Committee and directed the Power Division to proceed with the payments of all 11 IPPs as per the signed agreement except a company whose cases are under investigation at NAB.

Due to the limited availability of natural gas during winters, the consumers need alternative affordable resources for meeting the heating requirements. Hence the winter incentive package for electricity consumers from 1st November 2021 to 28th February 2022 was submitted by Power Division and approved by CCoE.

The CCoE directed Power Division that KE consumers should also be included in this package. The Committee also directed Petroleum Division to submit an inverse gas pricing mechanism for the same months within this week.

The meeting was attended by Minister for Finance, Minister for Energy, Minister for Maritime Affairs, Minister for Railway, SAPM on Power, Petroleum & Revenue. Adviser for Commerce and Investment to Prime Minister. Representatives of regulatory authorities and senior officials of Ministries/Divisions also participated in the meeting.

 

[ghazi52]

White oil pipeline project: ECC for locking tariff in dollar terms for 5 years

Mushtaq Ghumman
16 Sep 2021

ISLAMABAD: The Economic Coordination Committee (ECC) of the Cabinet has decided that the prospective tariff of white oil pipeline multi-grade movement project in terms of dollars will be locked for five years to be paid in Pak Rupees, official sources told Business Recorder.

The ECC took this decision on September 9, 2021 on a summary moved by the Ministry of Maritime Affairs, which is now more focused on petroleum sector instead of port affairs.

The following proposals were submitted for consideration and approval of the ECC: (i) the revised tariff of $1 per ton for HSD handling inclusive of PQA royalty (to be paid in equivalent Pak Rupees) to be implemented and incorporated in HSD pricing formula or OMC Dealer margin; (b) tariff differential amount for the period from July 1, 2012 to till June 30, 2020 amounting to Rs 1,505,962 to be incorporated from OMC Dealer Margin for recovery; (c) The revised handling tariff will also be applicable on handling of MOGAS through existing pipeline as an interim arrangement until a dedicated pipeline is laid by FOTCO and its tariff determined on actual cost basis and submitted, separately.

After detailed discussion, ECC decided that prospective tariff in terms of dollars shall be locked for 5 years to be paid in Pak Rupees, at the prevailing exchange rate, by PSO for HSD and MOGAS with immediate effect.

The ECC also constituted a Committee under the chairmanship of Deputy Chairman Planning to formulate recommendations for the ECC in the light of the report of M/s A.F. Ferguson & Co, regarding payment issue of outstanding dues of Rs1.5 billion payable by PSO since2012 to 2020.

The composition of the Committee will be as follows: (i) representative of Finance Division; (ii) representative of Petroleum Division; (iii) representative of PSO; (iv) representative of FOTCO; (v) representative of PQA; and (vi) Chairman, OGRA. The secretariat support will be provided by Ministry of Maritime Affairs.
Copyright Business Recorder, 2021

 

[ghazi52]

Refinery policy and its partial approval

Reservations about deemed duty collection delayed clear go-ahead

Zafar Bhutta
September 19, 2021

Refineries are required to invest in their expansion and upgrade projects from the special reserve account.


ISLAMABAD: The Cabinet Committee on Energy (CCOE) has adopted a diverse approach to deal with two sectors of the same industry; power and refining.

Pakistan’s refining sector meets the strategic requirements of the country as it also produces jet fuel for airlines and the air force. However, for a second time now, the CCOE has refrained from giving a clear approval to the refinery policy as it raised observations on the proposed 10% tariff incentives for oil refineries. The reservations were made despite the Petroleum Division sharing a detailed break-up of the refineries’ deemed collection and their investment.

Meanwhile, a power plant in the private sector was given the go-ahead to make payments despite clear advice from the National Accountability Bureau (NAB) to recover dues from all 12 IPPs, including Nishat Chunian, under Power Policy 2002.

NAB had established a case against Nishat Chunian Power Ltd due to the determination of tariff at the higher side. It further intimated, “The Ministry of Energy, if so desired, may proceed under Power Policy 2002 after securing the amount of loss caused to the state as established during the above stated NAB investigation in the best interest of the state.”

NAB wanted the government to recover the illegal gains from the IPPs set up under Power Policy 2002 before proceeding further on the process of payments.

However, the CCOE stopped payment to Nishat Chunian while directing the Power Division to make payment to 11 IPPs set up under Power Policy 2002.

Officials, privy to the matter, said that this was the result of a tussle between different groups in the cabinet committee.

The government has also formed a Cabinet Committee on Transport and Logistics and its mandate was to resolve issues of freight policy, transport, and logistics. However, the transport committee intervened in the matters of the Petroleum Division and directed all refineries to submit details of collecting deemed duty.

Hence, the CCOE on one hand dealt with the oil refineries, and on the other was the logistics committee, which was going beyond its mandate. Due to this, the refinery policy went back and forth between the Power Division and CCOE.
Read CCOE turns down hike in gas prices
The Petroleum Division had informed CCOE that oil refineries made the same investment of Rs200 billion, which they collected.
Why oil refineries were allowed to recover deemed duty?
In a letter sent to the committee on transport and logistics, Pakistan Refinery Limited (PRL) managing director said that there is a gross misunderstanding that deemed duty collected by a refinery is meant to be used for investment.
The correct legal status is that refineries entitled to the Tariff Protection Policy are required to create a ‘special reserve’ account in pursuance of directives of the government issued on June 25, 2002.
He said that the special reserve account of a refinery will be credited with that amount of after-tax profit, which is left after the distribution of allowable dividend.
Refineries are required to invest in their expansion and upgrade projects from the special reserve account.
It is important to note that at the start of this policy from 2002 till 2013 refineries were also allowed to offset their losses against the special reserve account.
He said that it is a factual explanation, which clearly shows an incorrect assumption that the total amount of deemed duty collected by a refinery will need to be invested.

A relevant extract of this letter further clarifies as follows, “The main objective of the tariff protection formula was to dispense with the minimum 10% rate of return requirement and provide incentives to oil refineries to operate on a self-financing basis...However, net profit after tax above 50% will be diverted to special reserve to offset any future loss or make an investment for expansion or up-gradation of refineries.”

It is clear that the prime objective of the tariff protection formula was to help the refineries to operate on a self-sustainable basis without any government subsidy.

Subsequently, deemed duty on kerosene, LDO and JP-4 were totally abolished with effect from June 10, 2007, and later effective August 1, 2008, deemed duty on diesel was reduced to 7.5%.

AF Ferguson & Co audited the amount accumulated in the special reserves as per the pricing formula and ENAR Petrotech Services (Pvt) Limited has carried out a technical audit of the installation of isomerisation unit. These audit reports were already submitted.

Interestingly, key stock market brokers have been allegedly making money by manipulating shares of two refineries; Attock Refinery Limited and National Refinery Limited.

The energy ministry informed the CCOE on Thursday that NAB wanted the government to recover the illegal gains from the IPPs including Nishat before proceeding further on the process of payments.
The Petroleum Division started work on the new refinery policy and the first draft was made in 2019 when Nadeem Babar was the special assistant to the prime minister on petroleum.

Since that time, there had been manipulation of shares of ARL and NRL on the stock market. The share price of ARL went up to Rs275 from Rs70 and NRL jumped from Rs90 to Rs650.

The shares of these refineries continued going up and down to benefit some key stock market players.

The energy ministry had also informed the cabinet body on energy that it should revise the master agreement signed with IPPs under Power Policy 2002.

On the manipulation of shares, the Securities and Exchange Commission of Pakistan (SECP) said, “The SECP, inter alia, is mandated to maintain fair, orderly and efficient capital markets, promote robust corporate and insurance sectors and protect the rights of investors through beneficial regulations. In order to perform its regulatory functions, SECP regularly carries out inspections, inquiries, investigations and takes such other regulatory actions, as deemed necessary, in accordance with its administered legislation.”

It added, “However, on account of SECP’s operational SOP’s and relevant laws, unless a matter is concluded, we cannot either confirm or deny initiation of any purported action or proceedings against any regulated entity or person. Please note that any final conclusion, decision or enforcement action, if any, is made public through placement on SECP’s website for public information, subject to the policy of the Commission and permissibility under the law.”

Published in The Express Tribune, September 19th, 2021.

 

[ghazi52]

Pakistan says finalising details of PSGP project with Russia

• Energy minister says govt 'moving fast', new terminals to have no take or pay liability

BR Web Desk
09 Oct 2021

Minister for Energy Hammad Azhar said on Saturday that the government is "moving fast" on finalising details of the Pakistan-Stream Gas Pipeline (PSGP) project, formerly called the North-South pipeline, with Russian counterparts.

The minister shared the development in a tweet post, saying that the government has facilitated the allocation of pipeline capacity firm offer to two upcoming terminals. “The new terminals will have no take or pay liability on the government like previous terminals and will be based on B2B models,” informed Azhar.

The minister added that these measures will enhance the capability of the system to handle imported gas but in a “cost-efficient manner.”

Back in July, after days of negotiations, Pakistan and Russia signed Heads of Terms to construct the $2.5 billion Pakistan-Stream Gas Pipeline (PSGP) project of 1,040 kilometers from Port Qasim to Kasur, to be completed by 2023.

The infrastructure of the 42-to-56 diameter pipeline, costing $2.25 -2.5 billion, will ensure the enhanced energy security of Pakistan.

The project will secure sustainable gas supply infrastructure for the next 40 years. This will be the most essential conduit between the installation of new LNG terminals and the industrial growth of Pakistan. Oil and Gas Regulatory Authority (Ogra) will determine the tariff of gas pipelines. The raw material of the pipeline will come from Russia whereas local companies will lay the pipeline.

The Pakistan Stream Gas Pipeline Project was announced in a joint statement of the Pakistan-Russia Inter-Governmental Commission on November 26-28, 2014.

The federal cabinet approved the Protocol to IGA on March 9, 2021. Amended IGA was signed on May 28, 2021, whereas the original IGA was signed on October 16, 2015. According to the IGA, Pakistan-nominated entity, Inter-State Gas System, will undertake the project through GIDC proceeds of (74%) and external equity (26%).

 

[ghazi52]

LNG new terminals

BR Research
11 Oct 2021

Finally, the ball is rolling. With allocation of pipeline gas capacity, the possibility of having new LNG terminal(s) is high. Any new terminal will be on a take and pay basis and the government will not assume any risk. There is growing market of imported gas. All investors want guaranteed pipeline capacity with which they can ensure certain volumes handling have commercial viability. However, there is one caveat. As per Ministry of Petroleum presentation in CCoE, the firm commitment of 500-600 MMCFD is proposed on a three-month rolling basis. This needs to be revisited as guaranteed availability will ensure projects bankability.

The two new terminals could significantly improve LNG security in Pakistan, and the reliance on spot buying cargos would be less; and that would take the media sensation out of the sector. The two existing terminals can handle 6 cargos a month each. This implies that one cargo coming every 5 days at each terminal can ensure 1200 MMCFD handling a month. At the same volume, with a third terminal, the storage will jump to 7.5 days and by having fourth, the terminal handling per cargo can reach 10 days.

This is good for energy security. And potentially, higher number of cargos can be handled to cater for peak demand and to reduce the risk on the system by delay in any cargo. For instant, recently a cargo on one terminal was delayed by two days, and the supply got short for Sindh industrial consumers.

Two companies -Energas and Tabeer Energy have acquired licenses to procure and handle LNG. However, the projects were stuck at the pipeline availability by Sui companies.

Some were of the view that there is not ample capacity and whatever is available should be allocated to the existing two terminals as they can expand – Engro has had an option of keeping a bigger FSRU. Others think that having new terminals is better for reducing supply risk by diversification. And with one (or two) FSRUs coming, the storage would double.

However, FSRU is temporary storage and not an asset of the country. Therefore, theoretically, it is better to build onshore gas storage facility.

That is to not only build strategic storage but also can help in buying off-peak season for peak days, as this could save cost of buying expensive gas in peaking season. This arbitrage was attempted to exploit by other countries – such as Dubai and Singapore; but seeing that producers altered the spreads (supply in peak season) to kill the arbitrage. Nonetheless, onshore capacity would be a strategic asset.

The purpose should be to develop strategic storage; but should not be seeing as an arbitrage opportunity on winter-summer spreads. Its expensive and higher storage capacity should be built to attain economies of scale. Returns are in long term. Private sector doesn’t have muscle or viability to build these. Government of Pakistan lacks fiscal capacity to do so.

Hence, having FSRUs by private sector is the best bet.

The energy minister is convinced on this philosophy. And the ministry finally found excess capacity in pipeline system. Total SGNP pipeline capacity – from south to north, is 1,200 MMCFD.

The long-term contract is of 900 MMCFD and this will increase to 1,000 MMCFD. Within it, 150 MMCFD is committed to be supplied to KE, and 150-250 MMCFD is being provided to Sui South customers. SSCG south network can handle 600 MMCFD. This leaves 500-600 MMCFD collectively excess capacity from both SNGP and SSGC, and 250-300 MMCFD each to be supplied to Energas and Tabeer Energy.

The question is given volumes of excess capacity and demand, is having two terminals viable? May be not. Gas load varies from 1500-1800 MMCFD. The existing two terminals are handling 1200 MMCFD. This leaves 300-600 MMCFD per month for new terminals to handle. The commercial viability of a terminal is on every month handling of 300 MMCFD and to handle 600 MMCFD at peak. Thus, at this point, it seems one of the two terminals will be built. The demand is growing every year. Hence, the second terminal may come in a few years.

The next question is what type of consumers the new terminals would handle and would it cannibalize the existing good paying Sui customers? SNGP is not happy with new terminals as they fear that the new terminals will take away their existing good customers. And this would leave them with low paying large number of domestic consumers and that would increase its losses. Well, with this philosophy, the gas marketing sector could never deregulate and liberalize.

The board of SSGC is supportive of private sector. Shamshad Akhtar – chairperson of SSGC, is a seasoned economist and she understands the benefits of privatization, deregulation, and liberalization. The market can only develop by bring competition to sui companies.

Private sector presence can eventually be better off with new private players coming in. For instance, marketing efforts by Shell in Oil marketing business in 90s forced PSO to work on improving its brand. Eventually, the market size grew and PSO kept its lion share. Sui companies should get aspiration from PSO.

The new gas companies would not have access to cheap domestic gas as is the case for Sui companies. The cost structure is in favour of the latter. There, marginal cost varies from domestic fields and on imported buying. The new players will bring efficiency in imported gas, and that would force Sui companies to be efficient in their allocation. They need to think on diverting cheap gas to low revenue customers or can come up with other ways.

The point is by having level playing field for everyone, eventually complacent players will have to come up to the mark. And its win-win situation for all.