News Analysis |
The government breathed a huge sigh of relief as a much prolonged natural gas project was rendered functional and started flowing on Monday, 25th December, in the face of a dangerous shortfall, more so than the usual winter drought.
Pakistan started receiving about 1200 million cubic feet per day (mmcfd) of imported liquefied natural gas (LNG) into the system, just as the prospect of severe shortages loomed over the country during the crucial winter months. The gas started flowing on Monday into the second LNG re-gasification terminal at Port Qasim.
In the meeting, Prime Minister Shahid Khaqan Abbasi directed the Petroleum Division to move forward with the next bidding round for the blocks that had acquired clearance of the Defense Division.
“We started receiving about 400mmcfd of RLNG from the second terminal on Sunday and were able to boost supplies to 600mmcfd by now,” a senior official at the PMO told a publication. This marked a long awaited ramp up in the country’s depleting domestic gas resources and accounted for almost 30 percent of the total gas supplies ahead of peak winter demand.
Pakistan is currently producing about 4 billion cubic feet (bcf) of natural gas against a constrained demand of more than 6bcf. The domestic gas is priced at about slightly more than half of what import LNG costs.
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The official said the second LNG terminal completed by Pakistan Gas Port Ltd (PGPL) originally started injecting gas into the national grid on Friday but the key junction operated by Sui Southern Gas Company (SSGC) at Port Qasim to receive imported gas collapsed and caused disruption not only from PGPL terminal but also from Engro terminal. After almost eight hours of disruption in imported gas supply, the RLNG from both terminals was finally restored, gradually reaching to a peak 1.2bcf on Monday, helping to plug a crucial deficit at a critical time.
Of the 50 blocks awarded provisionally in January 2014, state-owned companies OGDC and PPL won exploration rights for 39 blocks, reflecting lack of interest of foreign companies despite attractive incentives in the new petroleum policy.
“It was the most opportune time to have additional gas supplies flowing to the system in the last week of December when winter demand was peaking and hydropower generation ebbed to a low because of annual canal closures”, said an official of the PMO. He said that the Engro terminal was currently injecting about 600mmcfd of LNG from Qatargas and PGPL processing 600mmcfd supplied by ENI.
The official confirmed that managing director of the Pakistan LNG Terminals Limited, a government-owned company; Azam Soofi was called to the PMO and asked to resign two weeks ago. However, he said, that the botched removal of Mr. Soofi by PLTL board of director was not for posting penalties on PGPL for delayed terminal commissioning but his inability to see through the delay despite repeated explanations sought by the PMO.
On the petroleum end of affairs, the federal government, after a significant delay, has decided to hold a fresh round of bidding for petroleum exploration blocks in an effort to look for new reserves and appease the protesting provinces, sources say.
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The present government’s focus has thus far been on gas imports to bridge the shortfall, which is why it has not been able to auction new blocks to exploration and production companies. It had provisionally awarded licenses for 50 blocks to the companies in January 2014, which was expected to attract an investment of $371 million in the first phase. However, their bidding round was held by the previous administration of Pakistan Peoples’ Party (PPP) before the end of its tenure in early 2013.
Pakistan is currently producing about 4 billion cubic feet (bcf) of natural gas against a constrained demand of more than 6bcf. The domestic gas is priced at about slightly more than half of what import LNG costs.
Since then, the current Pakistan Muslim League-Nawaz (PML-N) government has not awarded any block to the exploration and production companies. It has been banking on liquefied natural gas (LNG) imports and has ignored the country’s hydrocarbon deposits, inviting scathing criticism from energy-rich provinces.
According to sources, these provinces argued that failure of the central government over the past four years to auction exploration blocks had hampered the search for oil and gas and caused losses of billions of rupees to the provincial governments in the shape of lost royalty and gas development surcharge.
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Khyber-Pakhtunkhwa had pointed out that not a single block had been put up for auction since 2014 out of 35 identified sites. It also argued that the lease agreements struck before 2012 had expired and were not being renewed. That led to a loss of more than Rs. 20 billion in royalty earnings to the federal government whereas K-P lost Rs. 5.8 billion in one year due to lower petroleum production.
The present government’s focus has thus far been on gas imports to bridge the shortfall, which is why it has not been able to auction new blocks to exploration and production companies.
A publication reported that the provinces also took up the issue in the Council of Common Interests (CCI), a representative body of provinces, in November 2017.
In the meeting, Prime Minister Shahid Khaqan Abbasi directed the Petroleum Division to move forward with the next bidding round for the blocks that had acquired clearance of the Defense Division. Of the 50 blocks awarded provisionally in January 2014, state-owned companies Oil and Gas Development Company (OGDC) and Pakistan Petroleum Limited (PPL) won exploration rights for 39 blocks, reflecting lack of interest of foreign companies despite attractive incentives in the new petroleum policy.
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Overall, eight companies got exploration rights in that round including two new ones – Canada-based Tallahassee Resources and Pakistan’s Al-Haj Enterprises.