Oilprice.com, a renowned publication for oil-related topics has recently published an article talking about the recent success of Qatar in capturing a fast-growing LNG market, Pakistan.
The author talks about the fact that even though the media has dampened the news of the Qatar Petroleum-Pakistan State Oil Company deal, but it is a big deal. According to the publication, the deal is successful in rendering Pakistan’s LNG imports cheaper, at the same time guaranteeing Qatar’s prime role on the Pakistani market, the QP-PSOC deal fully reflects both sides’ preferences.
Pakistan is a relatively new entrant in the LNG market, with the first terminal at the Port Qasim, Engro Elengy Terminal, has only started receiving the cargoes since 2015. The 600 million cubic feet (MMCF) per day terminal has only worked nominally.
However, soon after, Pakistan started building relations with Qatar, the Gulf’s primary LNG supplier. Labeled Pakistan GasPort, the second LNG import terminal in Sindh started operating in 2017, doubling Pakistan’s intake capacity. GasPort has failed to repeat the relative success of Engro, routinely functioning below capacity.
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The two LNG terminals’ operations are aided by Pakistan’s massive gas transmission system (at some 140 000km overall) that was improved on the back of the South Asian nation’s 5-6 decades of own gas production.
It must be noted that Pakistan had other potential methods of receiving gas, such as, via the Iran-Pakistan pipeline that hasn’t materialized to date as construction work on Pakistan’s side still is incomplete. Similarly, Turkmenistan–Afghanistan–Pakistan–India (TAPI) Pipeline remains incomplete as Pakistan hasn’t met the commissioning deadline of 2020, and according to the article, it is years away from happening.
Thus, the emergence of LNG as an alternative is a turn for positive as it would help the Pakistani economy in many ways.
The cheap source of energy is arguably the solution to the overarching energy crisis of Pakistan. By 2020 LNG makes up for 25 percent of Pakistan’s energy fuel and it went up from no contribution in 2014.
According to the article, the new Qatar supply deal is an indisputable boon for the economy. Unable to provide for the energy needs of the nation in terms of domestic sources, wary of demand surging quicker than expected, Islamabad needs cheap energy and a lot of it.
This is supported by the fact that the country’s own production of gas remains constant at 3.6 MMCf per day today. Similarly, the oil production is 24 thousand Barrels Per Day (kbpd) in 2021, down from 30kbpd due to the ongoing pandemic.
The article quotes Pakistani sources saying that the country’s shortage of gas would double to 3 billion cubit feet (BCf) per day in 2025 compared to today’s shortage of 1.5 BCf and by 2030, the shortage of fuel is expected to reach 5.4 BCf.
This means that the country needs to proactively seek LNG as an alternative for the current drop in domestic production along with an enhanced liquefaction capacity in the country.
Qatar as of March 2021, supplied Pakistan’s 80 percent of the country’s LNG, as a percentage of total LNG supplied to Pakistan. Thus, Pakistan’s ties to Qatar might not only lead to an increase in LNG movements in absolute numbers, but Qatar Petroleum would also most probably seek to consolidate its foothold with infrastructure-related mergers or acquisitions.
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It is worth mentioning here that in a recent visit by the Russian foreign minister, both countries have discussed protocols on the Stream Gas Pipeline Project, now named the Pakistan Stream Project, which will transport 1.6 billion cubic feet per day of liquefied natural gas (LNG) from Karachi to Lahore.