IBC/Energy Conference 2014

LNG Carriers & FSRUs

LNG Demand and Cooperation Opportunities

in Pakistan

Dr Gulfaraz Ahmed
Former CEO OGDCL, Federal Secretary Petroleum
18 June 2014 at Grand Hyatt Hotel Shanghai

Pakistan Primary Energy Supply Mix (%)

64.8 Million TOE (2012-2013)
6 % 0.5 %
12.8 %

Co
Hydro al
& Nuc
N Gas

48.2 %

Oil
32.5 %
natural Gas

Oil

Hydro & Nuclear

Coal

LPG

Natural gas based energy economy: 1st Iran, 2nd Russia, 3rd Pakistan
Country wide gas transmission, distribution and utilization network
83 % of oil consumed is imported that equals 27% of total energy mix
Coal input is 1/4th of world average: environmentally cleaner energy mix

05/14

Natural Gas Consumption by Sector (%)

1.506 tcf in 2012-2013
Power

3.2 3.1
7.9
28.6

CNG
11.7
Fertilizer
Feed
Industry

Power

Domestic

Domestic
Industry
Fertilizer
Feedstock
Transport (CNG)
Commercial

22.4

23

Fertilizer Power

05/14

Electricity Generation by Fuel

96122 GWh (2012-2013)
4%

0.1 %

35.9 %
28.2 %

Industrial
tariff highest
in the world

N Gas

Oil

Generation
Cost/KWh
N Gas: Rs 4.5-5.5
Fuel Oil: Rs 17-18
Diesel: Rs 22
Nuclear: Rs 7-8
Coal: Rs 9-10

Hydro
31.1 %
The world dreads generating electricity with oil: India & USA
generate less than 1%. No countrys economy can sustain generating
35.9% electricity using oil for years on end.
05/14
Urgent need to replace oil by natural gas, nuclear and coal in power

Fuel Consumption for Thermal Power

Generation 2012-2013
Diesel Oil:
Furnace Oil (FO):
Natural Gas:

218584 tons oil equivalent

7342755 tons oil equivalent
7084177 tons oil equivalent

There is an urgent need to replace whole of diesel oil and

most of FO in power generation for economical reasons as
the oil generated power is very expensive resulting in most
expensive power tariff especially for industry even with a
massive subsidy
Pakistan has fairly clean power generation mix and has no
environmental pressure but it is for reducing the cost of oil
generated power, that it is seeking to import LNG for
replacing diesel and FO

Natural Gas Discovered, Produced

and Remaining Reserves on 1.7.2013
Daily Production: 4126 MMCFD

25.055
tcf
Remaining

Produced

32.021
tcf

Produced tcf

Remaining Reserves tcf

05/14

Natural Gas Production & Demand

History and Projection MMCFD
9000
Actual
8000
7000

Projection

Unconstrained Demand of 8000

MMCFD in 2012-2013

6000

Constrained Demand

Shortfall
over 100%

5000
4000

Indigenous Production
3000
2000
1000
0

Constrained demand growing at 6% yearly, production projected declining

05/14
at 2% yearly. Unconstrained demand in 2012-2013 is 8000 MMCFD

Pakistan Natural Gas Supply Shortfall

Forecast by SSGCL (BCFD)

Billion Cubic Feet per Day

y = 0.0142x2 - 56.779x + 56758

R = 1

6.47

(46 mpta)

5
3.4 BCFD

3.88 (30 mpta)

3
2

2 (15 mpta)

0
2010

2012

2014

2016

2018

2020

Year
IP Gas Pipeline not likely to start delivering 1 BCFD gas to Pakistan in November 2015
TAPI Gas pipeline projected to deliver 2 BCFD by November 2018

Natural Gas Import Plan

Pakistan is facing natural gas shortage of 50 % exceeding 2
BCFD in constrained demand and 4 BCFD in unconstrained demand
scenario. While pursuing gas import through regional pipelines
from Iran and Turkmenistan, decision reliance has been placed on
import of LNG in short to medium time-frame.
Three LNG receiving infrastructure projects at Port Qasim,
Karachi have been approved by Cabinet Committee (ECC) in
principle. These projects will provide LNG receiving, storage,
regasification and transfer facilities.
(i) Fast Track Terminal Project 400 to 500 MMCFD
(ii)SSGC LPG Retrofit Project 500 MMCFD
(iii)New LNG Terminal Project(s) 500 to 1,000 MMCFD
Presently Fast Track Terminal Project is being executed on
priority. The other two proposed projects will be taken up in
Phase 2 of LNG import.

Emerging LNG Import Market & Terminals

Trend
No of LNG importers has nearly doubled since 2005
Emerging LNG importers includes: Bahrain, Croatia, Jamaica,
Lithuania, Pakistan, Philippines, South Africa and Uruguay
Half of the new importers since 2005 have selected FSRUs over the
land based terminals for:
lower investment cost,
Shorter time of completion
Interim LNG import solution till completion of permanent
terminals
Flexibility of deployment/redeployment
Pakistan has decided on a fast tracked FSRU which is being set up by
private investors on a tolling fee basis. The first LNG shipment is
targeted for end November 2014

LNG Purchase/Import Plan

Government of Pakistan is pursuing import of LNG from

Qatar on Government to Government negotiation basis
through a long term (20 years) contract. Pakistan State Oil
Company Limited (PSOCL) and Qatargas Operating Company
Limited (QOCL) have been nominated to negotiate and
finalize the contract
In addition, Expression of Interest has been invited through
Enquiry No. LNG 001/2014 for supply of 3 mpta of LNG for 5
years on Delivery Ex-Ship (DES) basis between November 01,
2014 to March 31, 2015. Qatar will also compete under this
offer
Additional 12 mpta LNG import capacity would be built up to
2018

LNG Import Infrastructure

Fast-track 400 million cubic foot gas (3mtpa LNG) for import
between November 01, 2014 and March 31, 2015 November
2105
One FSRU based terminal is being developed in private
sector at Port Qasim, Karachi by M/s Engro - Elengy Private
Limited (EEPTL) after competitive bidding process at a
levelized tolling tariff of $0.66/MMBTU. An LNG Service
Agreement (LSA) was executed between EETPL and SSGCL on
April 30, 2014. The FSRU has been leased by EEPTL from
Exilrate.
Additional Terminals are being planned but work will also be
started on a land-based terminal in parallel to increase LNG
import capacity to 15 mpta by end of 2017 and to phase out
leased FSRUs in the long run

Fast Track Terminal Project

M/s Inter State Gas System (ISGSL) called bids for obtaining the
LNG services of receiving, storage, re-gasification and delivery of
regasified LNG to Southern Gas Company Limited (SSGCL)
receiving point in the vicinity of Port Qasim, Karachi.
M/s Elengy Terminal Pakistan Limited (ETPL) emerged as the
successful bidder at a levelized tolling tariff of $0.66/MMBTU.
An LNG Service Agreement (LSA) was executed between ETPL
and SSGCL on 30-04-2014. The Implementation Agreement
between ETPL and Port Qasim Authority (PQA) has been
initialed on 23-05-2014 and approved by Ministry of Shipping.
Maximum completion time from the date of signing of LSA is
335 days (11 months)

Consumer Prices in Inexpensive Indigenous

Natural Gas Supply Regime
Consumer Prices include about 20% taxes inclusive of GST 17.5% and
Gas Development Surcharge 2.5%
Power/Industry/Fertilizer Fuel: US $ 6/million BTU Commercial: US $
7.7/million BTU
CNG: US $ 8/million BTU
Fertilizer Feedstock: US $ 1.2/million BTU
Domestic:
Lowest Slab: US $ 1.2/million BTU
Highest slab: US $ 6.4?million BTU
Weighted Average(WA) Price ~ US $ 5/million BTU
Weighted Average(WA) less 20% Taxes ~ US $ 4/million BTU

14

Economics of Replacement of Diesel and Fuel Oil

in Power Generation by Imported LNG
1.0 mpta in BTU content = 1.104642 million tons HSD per year in
power generation
1.0 mpta in BTU content = 1.192733 million tons FO per year in power
generation
HSD used in power generation per year = 0.218584 million tons
FO used in power generation per year = 7.342755 million tons
LNG required to replace whole of diesel in power = 0.2 mpta
First 3 mpta will replace diesel and 3.33 million tons of Fuel Oil in
power generation
Average cost of diesel per ton:
Average cost of FO per ton (Jul13-Feb14): US$ 665
Cost of 3.33 million tons = US $ 2,214 billion
Breakeven Equivalent cost of 2.8 mpta = 2214 million
Breakeven Equivalent Cost of 1.0 mpta = 790 million
However, Pakistan is seeking to reduce the generation cost by
replacing FO by LNG, which has to be cheaper than breakeven price15

LNG Import Economics for Break-even Fuel

Replacement
Equivalent cost at power plant site ~ US $ 15.5/million BTU
FSRU fee/transportation to plant ~ US $ 1/ million BTU
Break-even Price of LNG Ex Ship ~ US $ 14.5/million BTU
Use of natural gas will result in 20% higher thermal
efficiency so cost of power generated by LNG would be
20% less than that of FO, which will have a positive impact
on economy.
However, 3 mpta imported LNG at $14-14.5 per million BTU
will increase the weighted average natural gas sale price
before tax by 30%. The first 3mpta will therefore will not
be added to gas supply but earmarked for replacement of
diesel and LSFO.

16

% Increase in Gas Sale Price

Impact of LNG Import at Maximum Cut-off Price of US$

14/million BTU DES (FO Breakeven Price) on Natural
Gas Sale Price
150
2019
$ 10.0
120

$ 8.8

90

2017

$ 7.6

60

2018

2016

$ 6.4

30

2015

$ 5.2
LNG import increasing @ 3mpta per year

2014

$ 4.0
0

LNG Import mpta

12

15

Expectations of Government of Pakistan in LNG

Import
The News Daily of June 10, 2010 reported that according to
a representative of the Ministry of Petroleum & Natural
Resources, GOP expects a reduction of 30% in generation
cost through substitution of FO with RLNG. Accordingly 30%
reduction from the breakeven cost of US$ 790 million for 1.0
mpta comes to US$ 553 million which gives per million BTU
of RLNG of about US $ 11 per million BTU. Taking nearly 30%
increase in thermal efficiency with natural gas, the DES price
of LNG works out to be US $ 14.3 per million BTU.

18

Installed Capacity MW

30000
28000
26000
24000

For 2014, 2800 MW Installed Capacity with

65% Plant Availability and 75% Plant Factor, it
will generate !20,000 GWh that would meet
the Demand and there would be no load
shedding. 5000 MW short

26000

22477
22797

22000

19257

20000

17399

18000
16000

17799

15658
15662

14000

17498

19450

19384
17798

19420

20922
19786

19420

For 2011, with 65% plant availability and

75% plant factor 26000 MW generates
110,000 GWh that would meet the
demand and no load shedding for 5 %
GDP growth. 3000 MW short

12000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
04/2014

Gross Generation GWh

120000

110000

98213
95358
95661
95091
94385
91616

90000

85629
83269
80627

80000

70000

110000
110000

14000

100000

For 2011, 22797 MW with 65% Plant Availability

and 75% Plant Factor generate about 95091 Gwh.
Leaving a short fall of 14000 GWh. For no load
shedding 26000 MW will generate 110000 GWh
26000MW. Short fall 3000MW

75782
72405
65402

68117

For 2014, 28000 MW with

similar availability/factor will
generate 120000 GWh for no
load shedding for GDP Growth
of 5%

62102 65751
60000
1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
04/14

Fiscal year starting on July 01

Opportunities for Investment/Cooperation

1. investment in up-stream oil and gas exploration and
production: attractive policy offering $ 6-7/MCF
2. Investment and partnership in power sector: coal,
hydroelectricity, solar and wind power plants
3. Communication infrastructure: Gawadar Kashghar
Economic Corridor
4. Industry/manufacturing: low labor & raw materials
cost and attractive investment packages
5. Agriculture: corporate farming, processing and value
adding
6. Education: private sector institutions