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Liquefied Natural Gas (LNG)

Outlook in Pakistan
Petroleum Institute of Pakistan
January 11, 2016
LNG - Why?

Natural Gas - 50% of Pakistans primary energy mix


Natural Gas Production - Stagnant at 4,000 MMCFD for 10 years
Constrained Demand - 6,000 MMCFD Unconstrained Demand - 8,000 MMCFD

Pakistan needs to IMPORT Natural Gas - Pipelines or LNG


Iran-Pakistan (IP) Pipeline - 750 MMCFD 42-inch
Delayed due to international sanctions - First gas not available before end 2017
Turkmenistan-Afghanistan-Pakistan-India (TAPI) Pipeline - 1,325 MMCFD 56-inch
Ground-breaking Dec 2015 - First gas not available before end 2019

LNG is today the ONLY cost-effective solution for Pakistans Energy problems

3 Governments FAILED in 5 Attempts over 10 Years to import LNG


Integrated Approach - LNG Terminal developer was also LNG supplier
PML N Government provided Pakistan with its first LNG based gas within 20 months
Unbundled Approach - LNG Terminal development separated from LNG procurement
The Elengy 400 MMCFD LNG Terminal has added 12% to Pakistans Gas Supply
LNG - Infrastructure

Engro Elengy built the 400 MMCFD SSGC LNG Regasification Terminal in 11 Months
BOOT Model No Public Funds No Sovereign Guarantee
Year 1 200 MMCFD/$ 1.43 per MMBTU Year 2-15 400 MMCFD/$ 0.63 per MMBTU
This is the lowest regasification rate for any FSRU based terminal worldwide

Additional LNG Terminals


Second Terminal at Port Qasim 600 MMCFD
Terminal at Gwadar 400-600 MMCFD
Third Terminal at Port Qasim 400-600 MMCFD
Bahria Foundation Terminal 400 MMCFD
2 x Private Sector Terminals 400-600 MCFD

Pipelines - $ 6 Billion
Pipeline Augmentation 1,200 MMCFD $ 1.5 Billion
North-South Pipeline 1,200 MMCFD $ 2.5 Billion
Gwadar-Nawabshah Pipeline 1,200 MMCFD $ 1.5 Billion
Other Smaller Pipelines 600 MMMCFD $ 0.5 Billion
LNG - Price Dynamics

2 fundamental differences between the Oil market and the LNG market
Oil is produced first and then sold LNG is sold first and then produced
Unlike Oil, there is no international price benchmark for LNG
Supply-Demand factors + Geographical Pricing based on alternate fuel in the market

LNG - Critical Supply Chain Reliability Flexibility


LNG Basket Long-term Contracts Medium-term Contracts Spot Purchases

Most LNG Contracts in the world are priced at a Direct linkage to Oil
LNG price at 14% Brent of $40 would be $5.6 per MMBTU
20 LNG Spot Cargoes Procured by PSO
Brent Linkage 11.9% to 18.9% $ 6.7 to $ 8.8/MMBTU
5 Year Term Contract with Gunvor by PSO through Open Tender
Brent Linkage 13.37% 0.75 MTPA Current Price < $ 5.5/MMBTU
LNG Supply Contract between PSO and Qatar Gas finalized through G2G Process
15 Year Term Year 1-3 Min 1.5 MTPA Year 4-15 Min 3.5 MTPA
LNG - Demand

Pakistan is expected to be a 20 MTPA (2.5 BCFD) LNG market within 3 years


One of top 5 LNG importers in the world

Demand 4,000 MMCFD


Current Power Generation 800 MMCFD
New Power Generation 600 MMCFD
Future Power Generation 600 MMCFD
Fertilizer 100 MMCFD
Textile 500 MMCFD
Other Industry 500 MMCFD
CNG 400 MMCFD
Domestic 200 MMCFD
Other 300 MMCFD
RLNG - Cost

DES LNG Cargo Regas Terminal SSGC System SNGPL System Customer

RLNG - Cost Elements


DES price of LNG incl port charges
Wharfage and other charges
Marketing Company margin
Regasification charges
Regasification system retainage
LNG Terminal administration charges
SSGC system usage charges
SNGPL system usage charges
Transmission system losses
Distribution system losses

All costs associated with RLNG to be passed on to Customer

Deregulation of LNG?
RLNG - Power Generation

Regasified LNG (RLNG) is the most cost-effective fuel for Power Generation
Greater Efficiency
Lower Maintenance costs
No Storage costs
Ease of Transportation
No pilferage or adulteration
Minimal environmental impact

Power Generation based on 400 MMCFD of Regasified LNG (RLNG)


Supplied to 9 IPPs with 45% + efficiency 2000 MW with Diesel as alternate fuel
KAPCO, Fauji Kabirwala, Rouche, Hallmore, Orient, Saif, Sapphire, Altern, and Davis
Additional annual generation of 9 Billion KWh with no new generation capacity
Equivalent to 10% of total current annual power generation
Sustained Annual SAVINGS of $ 600 Million to $ 1 Billion

Under-construction 3600 MW RLNG based Powerplants with 62% + efficiency


Annual generation of 30 Billion KWh
Equivalent to 35% of total current annual power generation
Equal to ALL oil-based power generation in Pakistan
Annual Fuel SAVINGS will exceed $2 Billion

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