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Pakistan’s third floating LNG terminal is being planned for Gwadar Port, along the southwestern coast on the Arabian Sea.
Photo:
Associated Press
Pakistan is taking on its acute energy shortage by dramatically ramping up imports of liquefied natural gas, while undertaking the longer-term goal of upgrading its energy infrastructure with new pipelines, refineries and storage facilities.
Key to Pakistan’s plan are floating terminals that will convert imported LNG into gas.
Costing less than half of building a traditional on-land terminal and faster to get up and running, the vessels anchor at ports, often on a long-term basis, and pipe gas into land-based pipeline networks, helping cash-strapped countries meet urgent energy needs. The floating import terminals have opened up new markets for LNG producers, who are under pressure from falling prices that have halved in the past two years due to a wave of new supply.
The country kick-started LNG imports in 2015, with Pakistani petrochemical and energy company Engro Corp. Ltd. leasing a floating import terminal, stationed in Karachi’s Port Qasim from where gas is piped into Pakistan’s local distribution system. A second terminal is planned for mid-2017 by a consortium led by Pakistan GasPort Ltd. Up to five such terminals are needed, said Sheikh Imran ul Haque, chief executive of the country’s biggest energy importer, Pakistan State Oil.
“Pakistan has not seen as much restructuring in its energy sector as what’s happening today in decades. And if we’re successful, there’s a potential investment of around $15 billion in refineries, pipelines, and the other projects coming in,” Mr. Haque said.
Mr. Haque said that Pakistan will be in the market within the next four months to buy around 4 million tons per year of LNG to supply its second import terminal. The LNG will most likely be purchased in a series of tenders at between 0.75-and-1.5 million tons apiece, Mr. Haque added.
Pakistan officials see LNG imports as providing fast relief.
The country of nearly 200 million people has long suffered from a lack of investment in its energy sector, causing hours of rolling supply cuts to homes and businesses daily. The U.S. Agency for International Development estimates that power shortages curb Pakistan’s economic growth by around 2% a year.
ENLARGE
Floating liquefied natural gas terminals, such as the Independence (pictured), cost less than half of building a traditional on-land terminal.
Photo:
Georgi Kantchev/The Wall Street Journal
A heat wave last year in June killing more than 1,200 people was a stark reminder of Pakistan’s crippling power shortages: Many people were unable to switch on fans and air conditioning. The heat waves haven't been as intense this summer.
Pakistan Prime Minister Nawaz Sharif, who is up for re-election in 2018, has said addressing the country’s power shortage is one of his top priorities.
The country has around eight hours of interrupted power supplies a day, but that is dropping, Mr. Haque said.
Pakistan’s power production stands at around 12,000 megawatts at any given time, well below its total capacity of 23,000 MW, according to Washington, D.C.-based think tank the Wilson Center. Gas currently makes up around half of Pakistan’s energy mix, with the rest comprised of oil, hydro, coal and nuclear. It’s unclear how the new import terminals will change the mix.
The country produces around 4 billion cubic feet of gas a day, meeting around half of the country’s gas needs, Mr. Haque said. Compounding the shortfall, domestic gas output is falling at a rate of up to 3% a year.
Each LNG import terminal can supply around 0.6-to-0.8 billion cubic feet of gas a day, Mr. Haque said.
But Michael Kugelman, a South Asia expert at the Wilson Center, casts doubts on that assessment. Systemic problems in the country’s gas network—poor equipment and maintenance, and energy theft can cause transmission and distribution losses in excess of 30%, Mr. Kugelman said. Simply adding more LNG into the system doesn’t necessarily fix those problems, he said.
In terms of meeting Mr. Haque’s estimate of potential demand for five import terminals, China is planning the country’s third floating import terminal at Gwadar Port, along Pakistan’s southwestern coast on the Arabian Sea. Three other floating import projects are under consideration, he said, meaning he expects at least two of these needed to come to fruition.
The floating gas terminals will feed a network of pipelines in Pakistan, including several in the works.
China is building a pipeline eastward from Gwadar Port to Nawabshah, in the southern province of Sindh. That will move gas from the floating terminals and could also help with the transit of gas from neighboring countries. Pakistan has no gas pipeline imports, so plans to construct a pipeline to connect the port to the Iranian border to import from Iran’s gas field. A second government-to-government deal has also been done with Russia to build a pipeline from Karachi to Lahore.
Pakistan is weighing getting more gas from neighboring countries such as Iran through these pipelines, but that possibility faces challenges.
“For reasons of security and financing, these pipeline projects are fraught with risk and they may never be completed,” making growth in LNG imports more likely, said Mr. Kugelman at the Wilson Center.
Mr. Haque said industry is already benefiting from imported LNG. Production at one fertilizer plant in Karachi has risen 5% since using LNG.
Write to Sarah McFarlane at sarah.mcfarlane@wsj.com
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