KARACHI: Engro Elengy Terminal Private Limited (EETPL) and Sui Southern Gas Company (SSGC) signed Liquefied Natural Gas (LNG) Service Agreement (LSA) in line with the Federal Cabinet’s approval for the LNG import infrastructure project.
Shahid Khaqan Abbasi Minister of Petroleum and Natural Resources, Jam Kamal Khan Minister of State for Petroleum and Natural Resources and senior management of SSGC and Engro Corp attended the signing ceremony.
Khaqan Abbasi said, “In order to combat the energy deficit, we are working on developing an efficient and sustainable power generation, transmission, and distribution system that can cater to the demands of the country and boost our economy”.
LNG import is crucial because it will substantially reduce the production costs of thermal power by replacing furnace oil and will improve the efficiency of thermal generation plants. It is the fastest stopgap solution to Pakistan’s energy needs.
Sheikh Imran ul Haque Chief Executive Officer of ETPL expressing gratitude to the government and Ministry of Petroleum and Natural Resources said LNG import was the fastest short-term solution to Pakistan’s crippling economic needs. Pakistan’s existing gap between gas supply/demand is approximately 1.6 billion cubic feet per day (bcfd). At the current rate of consumption, it is expected Pakistan will run out of gas in less than 20 years, hence it is imperative to look for the alternative source of gas in and around Pakistan. Importing LNG will enable the government to save significant foreign exchange through import substitution of oil and alleviate the energy crisis plaguing the country.
ETPL had bid for the fast track LNG contract to handle up to three million tonnes per annum (MTPA) of LNG or 400 million standard cubic feet per day (MMSCFD) of re-gasified liquefied natural gas (RLNG) for the next 15 years.
The infrastructure of the terminal has to be constructed in 335 days. Once completed, the project will process imported LNG and inject 400 mmcfd gas to the national network, which will reduce the existing shortage of 1.6 billion cubic feet by one-fourth. The execution of the project is complex for many reasons includes engineering, procurement, construction and commissioning of a 24 kilometers high pressure piping network which includes diameters of 24” and 42”. EETPL is to construct and commission a new jetty within 11 months and involves safe integration of the FSRU and downstream piping network. Engro possesses expertise to develop and execute projects of such nature.
The ETPL tolling price is $0.66 per Million British Thermal Unit (mmbtu) is an extremely low price relative to international benchmarks. ETPL’s price is competitive and reflects ETPL’s focus on ensuring affordable LNG to the nation.
Unlike standard LNG import deals, the liability of Engro Corporation is unlimited and without a cap. SSGC has even the right to terminate within four months of signing of the LSA if certain conditions subsequent are not met saddling Engro Corporation with significant (dead) investment.
In case Engro Corporation is not able to meet the first gas date of 11 months from signing of LSA, it is liable up to $0.15 million per day. EETPL is also required to meet a service factor of 95 percent or better.
It is important to emphasise EPTL’s bid was declared fully compliant with the request for proposals by government independent consultants, subsequent to which the SSGC Board, Economic Coordination Committee of the Cabinet approved the project. Oil and Gas Regulatory Authority is third party auditors and EETPL to comply with all requirements of LNG Rules 2007 and LNG Policy 2011. EETPL is working with partners of international repute and is committed to comply with all safety regulations in Port Qasim Authority.
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