Delayed LNG import could save $1.5 billion

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LAHORE: Pakistan could save as much as $1.5 billion by immediately initiating already delayed imports of Liquefied Natural Gas (LNG) to meet the country’s power shortfall, the News learnt on Wednesday.

 

According to a conservative estimate, this would also lower the average cost of generation by Rs 2.50-3.50 per unit if diesel and furnace oil run thermal plants are fueled with LNG/local gas in next five years.

 

The move will lead to reduction of oil imports, as well as resolve power and gas shortages and the production of unaffordable energy in a phased manner, said sources.

 

So far though the move has suffered long drawn out delays at the hand of newly elected regime, putting recently announced power sector reforms at stake, the sources said

 

Nothing has come out of it so far but this time the stakes are very high this time due to multiple factors, sources said.

 

They added the federal government will have to take proactive measures to remove bottlenecks in initiating LNG imports. Unlike most of other countries in the world, Pakistan has been blessed by seaports that are connected with an all-encompassing gas pipeline network. They further said that we should primarily consolidate on this strength and kick start energy augmentation plan accordingly.

 

Initially, the import of LNG in low quantities for six-to-eight-months can mitigate power shortage by 15-20 per cent and plug deficit of natural gas by 5-10 per cent.

 

In the medium-term, LNG import can resolve the ongoing power crisis by about fifty percent besides improving supplies of natural gas by up to 30 per cent for cooking, heating and industrial purposes.

 

Presently, the depleting gas supplies could only be stabilized by importing LNG.

 

Alternative options of thermal power generation by furnace oil & diesel are too costly and could be replaced by LNG without investing a penny.

 

Immediate LNG import is a fairly simple remedy for a complicated and messy energy sector, the sources said.

 

Conversion of existing thermal plants to coal would take approximately two years and hence is not an immediate solution.

 

Under the national power policy 2013, the government has retired circular debt in less than just two months in power. Electricity tariff is being increased to maximum levels in a bid to avoid payments of subsidy and subsequent accumulation of circular debt in future.

 

However, these steps are not a permanent solution. Policy makers will have to jumpstart generation of cheap electricity simultaneously to reduce average power tariff as costly electricity will not be bearable for extended periods.

 

Pakistan needs to enhance the share of LNG in its energy mix to 30 per cent from present zero per cent in next five years in order to address challenges of quantity and quality, the sources observed.

 

LNG should be used for meeting the peak load demand and much of the base load of about 6,000 MW of electricity.

 

These plants utilizing it are located closer to load centers. Losses will be minimal and there will be no cost of setting up infrastructure or transporting fuel/coal.

 

The start should be a 2-5- year take or pay agreement for terminal facilities could be struck with EVTL and SSGC, the sources said.

 

For example, the EVTL deal will lead to utilization of its existing terminal infrastructure for around six months to supply 500 mmcfd for a week, twice a month or on the average 200 mmcfd. This is enough for cheap generation of 500mw of power.

 

Local LNG import structure capacity could be increased in stages to 750-2,000 mmcfd depending on conversion of thermal plants to gas by incorporating other players, sources said.

 

These arrangements will also help meeting CNG requirement of 3,000 CNG fueling stations and over two million CNG-powered vehicles in the country.

 

In the next 10 years, production of natural gas is expected to fall by 30 percent while demand is expected to rise by 70 percent reaching 8.5 billion cubic feet per day.

 

Fertilizer and petrochemical industries are also completely dependent on natural gas with no alternate in sight. In order to overcome all these supply side constraints, LNG import is one of the most viable and ready-to-implement options, sources concluded.



Courtesy:  The News


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